Galen Weston, Chief executive of Loblaw has been having two minds about delivering online groceries to Canadian customers but could change his mind any time soon, as latest Friday news has it that Amazon is buying Whole Foods for US$13.7 billion.
Whole Foods, which is said to have 13 stores in British Columbia and Ontario, has been having huge implications here in Canada because they gives the virtual retailer clear bricks and mortar access points in Toronto as well as another channel for the potential distribution of fresh food. Amazon has a total of six centers across Canada; two in Vancouver and four in the Greater Toronto area.
“All three traditional grocers (Loblaw, Sobeys and Metro) are suffering from what I call the “Apple” syndrome,” states sylvain Charlebois, food industry expert and dean of management at Dalhousie University in Halifax.
“In 2001, Apple decided to get into music, an industry that it wasn’t in, and now they dominate sales in that industry brilliantly, the music business resisted change for many years, and an external force came in and initiated change and that is exactly what is happening in Canada. Amazon is making a statement today. (The grocery retailers) will need to change.”
According to CIBC, (Loblaw, Sobeys and Metro) has had share incursion from Costco and Walmart, with shares of grocery sales from an estimation of 10 per cent and 7 per cent respectively up from 7 per cent and 6 per cent in 2010.
According to Nielsen, packaged food bought online accounts for 1.9 per cent of Canada’s $140 billion grocery market, but sales online are projected to grow 20 per cent a year and will account for 5.3 per cent of the market by 2020.
Packaged food accounts for 0.6 per cent of the market currently, while health and beauty items account for 1.8 per cent of sales. Non-grocery staples such as pet foods and household paper products account for 3.2 per cent sales, according to Nielsen.
It is believed that Amazon has great plans for changing the mechanics of grocery shopping since Canadian online grocery delivery companies use their own trucks for business.
“Amazon is exploring product delivery with drones, “Charlebois said, “And it is 16 times more expensive to run a fleet of trucks, between labours, energy and time, than it is to use drones.”