Skip to main content

Wal-Mart will start selling food online in Canada with non-perishable fare, but will look into expanding into fresh offerings.

J.P. Moczulski/The Globe and Mail

The food fight is going digital.

Discount behemoth Wal-Mart Canada Corp. has quietly started to sell food online, ranging from Halloween candy to gluten-free organic cereals and prepared Thai dishes. Its initiative sets the stage for an even more intense battle with grocery rivals in an already cutthroat field.

The world's largest merchant can quickly squeeze competitors when it focuses on any category and Wal-Mart's new push into online food has the potential to cut further into grocers' already narrow profit margins.

Story continues below advertisement

"It's going to make it tougher for everybody," said Thom Blischok, chief retail strategist at consultancy Booz & Co. in San Francisco. "This is the beginning of a very unique transformation."

Retailers are shifting their selling online in categories ranging from books to electronics and toys.

But food has remained a tough cybernut for merchants to crack, because its distribution entails shipping sometimes bulky products to customers while ensuring the food stays fresh and arrives on time.

In the dot-com era more than a decade ago, several online grocery retailers faltered because they couldn't find the right business model.

A few North American players have survived, including Grocery Gateway, which was struggling when it was purchased in 2004 by Ontario-based Longo Brothers Fruit Markets Inc. It has remained regional while streamlining its distribution systems.

Now with U.S. giants such as e-commerce specialist Amazon.com Inc. and Wal-Mart putting a priority on food, the fight is heating up to satisfy customers' palates and grocers' bottom lines in the digital age.

Wal-Mart, which already sells food online in the United States and beyond, is starting in Canada with non-perishable fare, but will look into expanding into fresh and frozen offerings, spokeswoman Susan Schutta said. "We are talking to our customers to understand what they need, beyond" non-refrigerated packaged goods, she said in an e-mail.

Story continues below advertisement

Wal-Mart generally offers free delivery on all its products, although not in the Canadian territories. And it's testing same-day shipping in Toronto with Canada Post, which does its regular deliveries.

In the U.S., online sales make up about 2.5 per cent to 3 per cent – less than $10-billion (U.S.) – of the $857-billion grocery market, but that could rise to between $100-billion and $110-billion in sales by 2025, Mr. Blischok calculates. In Canada, food e-commerce makes up a tiny proportion of the grocery industry – a fraction of 1 per cent – but could also grow tenfold by 2025, his figures show.

A shift online is inevitable as more consumers use their smartphone to access information and make purchases, said Stewart Samuel, program director at researcher IGD.

Global retailers, such as the British titan Tesco PLC as well as Wal-Mart, have tested mobile shops at subway stops and other convenient locales to allow time-stressed consumers to buy everyday goods, including groceries, on the run.

Wal-Mart is a good candidate to provide online food shopping because of its large sales volume, which can help make up for razor-thin profit margins in online groceries, Mr. Samuel said.

But Wal-Mart's entry into food e-commerce will be felt by rivals. "It's hard to compete against someone like them," said Stephen Tallevi, general manager of Grocery Gateway.

Story continues below advertisement

Grocery Gateway, which operates in southern Ontario and charges $9.99 (Canadian) for delivery, has improved its bottom line by shifting all of its distribution to one site in Rexdale, Ont., he said. Previously, its staff picked and packed the groceries from stores after they closed, resulting in extra labour costs and sometimes limited food options, he said.

The centralized system allowed the business to cut staff by as much as 15 per cent, reduce out-of-stock items and meet growing demand, with sales expected to rise more than 10 per cent this year, especially among young urban professionals living in condominiums, he said.

Grocery Gateway, which he said is now in the black, plans to take on bigger rivals such as Wal-Mart by focusing on its core strength of higher-margin fresh foods, he said. As well, it is training its truck drivers, which it calls field service representatives, to provide personalized service, such as carrying customers' groceries into their kitchens. Even so, Wal-Mart generally "drives prices down. We see them as a serious competitor."

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter