Canadian grocery stores team up with delivery startups to survive

By Adrian Ghobrial

For decades, the Canadian grocery shopping experience has largely remained the same. You go to a sprawling supermarket, purchase a cartload of grub and lug your bags home.

But that seems to be changing.

Several grocery delivery startups are getting into the Canadian market, and they want to do your shopping. But do you trust someone else to pick your produce — and can you stomach the prices?

Using the InstaBuggy and Instacart apps and websites, for example, you can order groceries from a long list of stores. Both claim they can get your groceries to your door in an hour or two, though they have different payment structures.

How it works

InstaBuggy charges a flat $19.98 delivery fee, whether your order is $50 or $500. (If you add a stop at a second store for the same order, you pay an additional $9.99.) It used to charge a markup on each item, but realized the business model wasn’t working. In September, it started honouring in-store pricing with the flat-rate delivery fee and found about 75 per cent of clients are now repeat customers.

Instacart charges a 7.5-per-cent service fee on all orders, plus $3.99 on orders more than $35 or $7.99 for orders up to $35. It’s $2 more to get groceries in an hour and there’s a “Busy Pricing Fee” for delivery times in high demand. The company also offers a $149 membership with unlimited same-day grocery delivery on orders over $35.

Groceries delivered to your door isn’t a new thing. Grocery Gateway has been offering the service for years. But now, all major grocers are getting in on the action.

Sylvain Charlebois, dean of Dalhousie University’s faculty of management, said most major players in Canada are jumping into the game because of Amazon.

“The U.S., in the next month or so, will see two grocers go bankrupt as a result of the Amazon effect,” he said. That’s why a lot of grocers are trying to increase their virtual footprint doing what they’re doing.”

Getting people to let go of their produce is paramount to changing customer habits. Eighty-one per cent of Canadians surveyed in 2017 by PricewaterhouseCoopers said they preferred to do their own grocery shopping.

But Charlebois’s research shows once people try delivery, they are likely to continue using the service.

“Seventy-eight per cent of people who order (delivery groceries) once will order a second time,” he said.

“Once you get to a third or fourth time you create habits. That’s what grocers are looking for right now.”

For those concerned about not being able to pick their own fruits and vegetables, Instacart’s Canadian GM Andy Anthony said the company’s shoppers are highly skilled.

“Once you’re picking apples six, seven times a day, you really develop some skill,” he said. “The proof is in the pudding. You try the service, you see the product is really high quality.”

InstaBuggy shared similar sentiments.

“We wouldn’t purchase something for you that we wouldn’t purchase ourselves,” said founder and CEO Julian Gleizer.

Loblaw Digital Marketing Director Adam Jardine said the company, which has teamed up with Instacart, is going where the customers are — online.

“All retailers are feeling the pressure for what’s next for online groceries and online in general,” he said.

Interestingly, InstaBuggy pays its shoppers the entire $19.98 customers pay for shopping, packing and delivery. The company makes money, in part, by selling the data collected from customers’ grocery lists, shopping habits and demographics. Gleizer added the company has an “iron-clad privacy policy” and never sells personal customer information like names, emails and phone numbers.

So what does the future hold for your grocery experience?

“Grocery shopping is in transition right now,” Charlebois said.

“You’ll continue to see people going to a grocery store (in the next five to 10 years,) but the size may change and the footprint may decline, as we see more and more people move to using their phones and devices to order groceries on demand.”

Related stories:

Groceries on the GO: Loblaw customers can pick orders at select stations

Instacart buys Toronto-based Unata as it gears up for Canadian expansion

Loblaw closing 22 stores, launching home delivery ahead of ‘difficult year’

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