Costco Wholesale Corp. is taking a step into online grocery shopping in Canada, entering an increasingly competitive e-commerce market.
The warehouse retailer is starting with only non-perishable items for delivery to Costco members from the Greater Toronto Area to Niagara Falls, Ont.
Customers navigate their shopping carts at a Costco store in Mississauga on May 15. 2017.Nathan Denette/The Canadian Press
“Convenience is clearly the most exciting part of this,” Costco Wholesale spokesperson Ron Damiani said of the new service, dubbed Costco Grocery. Deliveries will be processed through the company’s new business centre on Thermos Road in Toronto, and can include some food items, health and beauty aids, vitamins and supplements ― but no fresh produce, meat or dairy. All orders in the beginning phase are to arrive within two days, and service charges will be waved for orders of more than $75.
“Part of the testing that we’re doing right now is to figure out exactly how big the average order is going to be,” Mr. Damiani said. “That’s part of the reason why we’re just concentrating this test in the relatively [small] geographical region.”
E-commerce for foods is a fast-growing segment of the retail industry. Amazon.com Inc.’s US$14-billion purchase of Whole Foods last August sent shock waves throughout the grocery industry. Online grocery shopping is projected to be worth US$100-billion by as early as 2022. By that time, about 70 per cent of shoppers are expected to buy their groceries online at least occasionally.
Canadian companies are no exception to the industry-wide scramble, or the push to fend off Amazon. In January, a U.S. grocery-delivery company called Instacart acquired Toronto-based startup Unata for about $65-million, hoping it could be a pathway into the Canadian market. Unata makes and tracks digital coupons and has been working on a voice-activated online shopping tool. Instacart is behind a grocery-delivery service being offered by industry giant Loblaw Cos. Inc. that is expected to grow to 16 Canadian markets from 11 by the end of the year. Galen G. Weston, chief executive at Loblaw, said the company plans to “blanket” Canada in grocery e-commerce service by the end of the year. Walmart Canada Corp., too, has dived into the grocery-delivery market across the country.
But Mr. Damiani is wary of comparison to competitors, because Costco does not carry the variety of groceries the others have. “I don’t think we can compare what they do and what we’re going to do," he said. Costco carries about 3,500 items, including both grocery and non-grocery products. In comparison, Mr. Damiani said, a typical grocery store offers 75,000 to 120,000 products.
Mr. Damiani said the company would add “a couple dozen jobs, at the start,” then wait to see what expansion looked like across the country. The company needs to ensure a baseline level of service before considering moving into the rest of Ontario and Quebec, he said.