Grocery giant Loblaw Cos. Ltd. is testing a fee-based membership program to draw more consumers, borrowing a leaf from the playbook of e-commerce titan Amazon.com Inc. and discounter Costco Wholesale Corp.
On Monday, Loblaw, which also owns Shoppers Drug Mart, unveiled the pilot program PC Insiders (PC stands for President's Choice, the retailer's own brand) for its PC Plus loyalty members who also have a President's Choice Financial Mastercard.
Members will pay a $9.99 monthly or $99 yearly and get a range of perks, including extra reward points and free shipping for some purchases. The program is expected to expand next year beyond select PC Plus members who also have the Mastercard.
PC Insiders applies to Shoppers Drug Mart's beautyboutique.ca, its Joe Fresh offerings and joefresh.com online deliveries as well, and its Click & Collect e-commerce service at almost 200 of its locations.
The latter entails customers ordering their groceries on the internet and picking them up at the stores.
"We are working hard to meet the changing needs of Canadians through the combined reach of our digital properties and retail network," Galen G. Weston, chief executive officer of Loblaw, said in a statement on Monday.
Canada's largest grocer is facing stiffer competition from Amazon, which acquired Whole Foods Market Inc. for $13.7-billion (U.S.) this year, raising the stakes in the e-commerce food wars. As well, retail heavyweights such as Costco and Wal-Mart Stores Inc. are bolstering their grocery businesses, putting heat on incumbents such as Loblaw.
Retailers tap into membership programs such as Amazon's Prime in an attempt to keep fickle customers loyal to their business rather than switching to a competitor. Once shoppers have paid a fee to shop at Amazon or Costco, they tend to feel pressure to keep shopping there to get their money's worth from the charge.
Now, Loblaw is banking on the heft of its chains, such as its namesake and Real Canadian Superstore and its Shoppers Drug Mart stores, to create a single membership program for online and bricks-and-mortar consumers.
"This really does smack of Amazon Prime," said Marion Chan, principal at grocery adviser TrendSpotter Consulting. "But with Amazon Prime, you're getting something that is very valuable, and that is free shipping. The question with Loblaw is: How are they going to really make it worth the consumer's while?"
Even so, she said retailers such as Loblaw are racing to find new ways to draw customers since Amazon announced its deal to buy Whole Foods. "It has gotten the Canadian retailers to stand up and take notice. They need to react."
Peter Chapman of grocery consultancy SKUfood said Loblaw is being aggressive in trying different strategies to understand how consumers are changing. "But Loblaw has to make sure it isn't confusing consumers," he added.
Loblaw has been responding to the fast-changing retail landscape with an array of initiatives. Last week, it announced a partnership with U.S.-based tech delivery startup Instacart to begin a premium-priced shipping service for online grocery purchases, starting on Dec. 6 in Toronto and expanding to other parts of Canada next year. The Click & Collect program is expanding rapidly, providing Loblaw with a cheaper e-commerce business model than delivering online orders.
By February, Loblaw will combine its PC Plus rewards program with Shoppers Optimum to create PC Optimum.
The PC Insiders fee-based membership program will provide subscribers with such benefits as 20 per cent back in PC points when they buy essentials such as diapers, infant formula and PC Organics products in-store and online; 20 per cent back in PC points for Joe Fresh products in-store and online at joefresh.com; and 20 times the PC points for purchases at beautyboutique.ca.
Other perks include free Click & Collect pick-up service at almost 200 Loblaw stores; free shipping for beautyboutique.ca and joefresh.com purchases; a $99 PC travel credit once a year when booking a trip on pctravel.ca (for annual subscriptions only).