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article imageLoblaws expands online business in Canada and hikes dividend

By Ken Hanly     May 2, 2018 in Business
Brampton - Loblaws is planning to extend its on line grocery shopping services and also expand home delivery services. The company says that it plans to "blanket the country" with online grocery services in Canada.
As reported in a Digital Journal article last November it decided to close 22 stores and begin home delivery to become more competitive.
The company has a chain of over 2,000 stores in Canada with headquarters in Brampton and is Canada's largest food distributor. At one time it operated stores in some US states but they were sold off.
Loblaw's delivery service to be expanded
The delivery service which started last year will be expanded to five more areas this year including Montreal, Halifax and Regina. It is currently available in 11 markets including Toronto and Vancouver. The supermarket chain is partnering with California-based Instacart to provide delivery service. The company chose this rather than attempt to build up its own delivery service.
The click-and-collect program
Another online option is the click-and-collect program. Customers can order groceries online and then pick them up. Loblaw is adding 500 new pickup sites this year. By the end of this year the company wants to have more than 700 pickup locations. The new locations will include more grocery stores, GO train stations in Ontario plus Shoppers Drug Mart locations. The first new locations should start in the coming weeks.
In a conference call with analysts Loblaws president Galen Weston said that the company is looking for ultra-convenient spots for customers to pick up their online orders.
By the end of this year, the company expects that fully 70 percent of the country will have access to the company's click-and-collect and home delivery services.
Amazon is the big competitive threat
Amazon acquired Whole Foods last year giving it access to the Canadian food market. Canadian retail grocers have been reacting to the challenge of competing with the giant.
Other Canadian grocers such as Metro Inc. has bolstered its e-commerce options launching new services in Ontario.
Sobeys Inc., both a retailer and wholesaler, has signed a partnership deal with the U.K. Ocado Group to help it build its online shopping business. The company will build a customer fulfilment center in the Greater Toronto Area and launch the service in about two years. Some experts claim the time period is too long and Sobey's will lose customers to more nimble chains. However, Sobeys claims it is confident in its plans.
Michael Medline, CEO of Sobeys, said its first e-commerce fulfilment centre will not be built for another two years or so. He claimed it will take years to turn a profit. But he said that, long term, the robotics systems for home deliveries will be the most profitable online grocery solution in Canada. “If you don’t believe in growth or e-commerce, this is not the deal for you.”
As mentioned, Loblaw has decided to partner with Instacart and not build its own distribution center. Customers can use the Instacart website or app to order and Instacart will pick up and deliver the order from Loblaw stores.
Weston noted with interest that different grocers were choosing different ways to meet the challenge and said: "The thing is, none of us can really predict, you know, where things are going to end up." However, he had confidence in the path Loblaw had taken.
Founder of Retail Prophet Doug Stephens said: "I think that every grocery store including Loblaws has to not only just make some linear improvement in what they do, they really have to make a quantum change in their ability to serve customers online, to deliver fast to really win over the online customer, because that's definitely something that's going to be in play for Amazon and Whole Foods. I think that a company like Loblaws shouldn't just be saying, 'How can we play online with grocery?' The question is "How can we redefine the online grocery shopping experience?'"
Discount giant Walmart Canada is also expanding its online grocery service in Canada.
Loblaw hikes quarterly dividend
The company is looking after its investors as well as customers with a hike in the quarterly dividend to 29.5 cents from 27 cents per share. The company reported improved earnings for the quarter.
Loblaw earned a profit attributable to common shareholders of $377 million or 98 cents per diluted share on $10.37 billion in revenue for the first quarter ended March 24. That compared with a profit of $232 million or 58 cents a share on $10.40 billion in revenue last year.
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