Just last month, grocery giant Loblaw announced plans to test a new click-and-collect service at 3 stores in the Greater Toronto area. Under the new click-and-collect model, customers order online and pickup in store.
In contrast to door-to-door delivery, click-and-collect is considered more profitable since it eliminates the costly process of delivery. It lowers labour and distribution costs and customers do not have to wait around for delivery times.
During a conference call announcing the latest results, Loblaw President Vincente Trius said online “is part of our strategy, it’s part of a complementary strategy behind the omni channel and, yes, we’re bringing that to Canada.”
Loblaw’s new strategy comes on the heels of competitors who are venturing online. In Canada, Amazon has started selling dry grocery goods over the Internet and Walmart has announced plans to increase its online grocery business.
Amazon has announced plans to expand its ‘fresh’ business online in 2014. If trials are successful in Los Angeles and San Francisco, it could expand the program outside the US.
Europe has led the way in its online and click-and-collect grocery business thus far and serves as a model for North American companies to look at.
Tesco, the UK’s biggest grocer offers click-and-collect services for over 800 stores and uses ‘dark stores’ to supply groceries to nearby locations.
In France, it has been reported that 1 in 5 shoppers have used click-and-collect from major grocery chains such as Leclerc and Carrefour. Leclerc now has approximately 325 pickup locations in France recently reported a 68% increase in click-and-collect sales from a year ago.
Competition for Loblaw’s new plan will come from Grocery Gateway that delivers groceries for the Longo’s chain to customers within the greater Toronto area. Grocery Gateway operates a centralized fulfillment facility in order to supply customers with groceries selected online and delivered at requested times.
Click-and-collect is considered to be more profitable than delivering groceries. A McKinsey & Co. study last year revealed that the click-and-collect model offered up to a 20% increase in margins over home delivery, but the average basket size was smaller.
Companies have different click-and-collect pickup locations to choose from. They can attach drive through locations to existing stores, install refrigerated lockers at different locations and create new warehouses – dark stores – that supply online orders.
Loblaw’s recent purchase of Shoppers Drug Mart gives the company access to approximately 1,100 drop points where online grocery orders can be deposited. Shoppers Drug Mart locations are conveniently located near where people live, especially in urban markets.
This could have been one of the key deciding factors in Loblaw’s decision to purchase SDM, setting themselves up for success in the emerging omni channel reality in Canada.
In a world where technology and convenience keep advancing at fast rates, the new click-and-collect model could prove to be successful as consumers look for ways to save time. Enabling consumers to select and order groceries online and select pickup times places control in the consumer and enables them to save time and money.
Click-and-collect provides the newest way for consumers to select and collect groceries while offering savings for both consumers and retailers.