Loblaw’s Hits $1 Billion in E-Commerce, Outlines Micro-Fulfillment Plans

The grocery giant is building its digital innovation through click-and-collect, third-party marketplaces, home delivery, and more.

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Need to Know

  • Grocery giant Loblaw has reported topping $1 billion in e-commerce sales for 2019, nearly double the total form the year prior. 
  • Loblaw offers many different digital options, including the PC Express click-and-collect, delivery partnered with companies such as Instacart, and traditional e-commerce sales. 
  • Click-and-collect remains the highest-growth and highest-revenue generating e-commerce option for the grocery chain. 
  • Loblaw also shared details about a new micro-fulfillment center it is piloting that will streamline e-commerce and make filling orders at least four times more productive. 
  • Loblaw leading digital loyalty program PC Optimum boasts over 18 million members. 

Analysis

As one of the largest grocery chains in North America, Loblaw is on the frontline of digital innovation, and its recent investments are paying off to the tune of $1 billion in e-commerce sales for all of 2019. That number represents nearly double the e-commerce sales of 2018, a massive leap for a sector that is still experimenting with customer standards and best practices. 

“When we first launched e-commerce, you picked up your order next day,” says Herman Paek, SVP of Loblaw Digital. “Now we have a range of services—delivery or pickup—available the same day and even in as little as one hour, and we’re seeing that’s what customers expect. And as we’ve strengthened the offer, we’re getting really strong repeat business.”

Loblaw Digital encompasses several different brands, including Real Canadian Superstore and Shoppers Drug Mart. Loblaw recently launched a third-party marketplace to populate its e-commerce inventory, adding toys, baby items, kitchen, pets, and other items to online shelves. That marketplace is powered by PFtech, a company Loblaw acquired early last year.

A large part of Loblaw’s e-commerce success comes from its PC Express click-and-collect service. Using the option, customers can shop online and fill a cart, then head to a store and pick it up within a window as short as one hour. The service plays of the order-online pick-up-in-store model many large retailers are quickly adopting.

Home grocery delivery is also growing for Loblaw. In an earnings call last week, Loblaw president Sarah Davis mentioned that “the impressive growth in e-commerce is right across the board,” and though click-and-collect is growing more rapidly than home delivery, that feature is still climbing steadily. 

“Providing our customers with options is very important to us,” says Paek. “Although home delivery is a fairly new service, we offer it nationally and have seen strong adoption of the service.”

If that’s not enough to bolster e-commerce options, Loblaw is also continually experimenting with increasing options for city-dwellers. 

“We know that our urban customers are looking for additional ways to shop,” adds Maek. “In addition to delivery and in-store pickup, last year we opened our first pickup only location for PC Express in Toronto, located street level of a condo building. We’re getting really strong repeat business and many new PC Express customers as a result of this location.”

Pickup-only locations serve to drive further digital adoption and unlock convenience for those living in cities who may want to find a better in-between option besides heading to a physical store or having it delivered to their door. 

The next step in Loblaw’s continued e-commerce expansion relies on streamlining delivery and fulfillment for its growing suite of digital options. The grocery chain is focusing its attention on micro-fulfillment options, which can be four times more productive. Loblaw is currently testing a new center in a location around Toronto. On a recent earnings call, Loblaw also announced it is closing two aging distribution centers.

Loblaw shared details with Digital on how its micro-fulfillment will work: customers will order ahead in the normal fashion through the PC Express online portal. At the automated picking facility, once the order is received, “it may be split by automated picking and/or in-store picking, depending on the products requested.” Instead of employees walking the store to pick out orders, the automated portion brings groceries directly to an employee to pick and pack. 

Once the order is complete, the order heads to a staging area where a final employee checks everything and stores the order in the appropriate area, whether its fresh, chilled, or frozen. Then once the customer arrives, it is all placed together and brought out to the waiting customer.

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