PHOTO DAVID BOILY, LA PRESSE ARCHIVES
Our distributors are now taking the online market more seriously by taking a remarkable turn.
Posted yesterday at 11:00 a.m.
Nathaëlle Morisette from The Press recently reported to us that Sobeys/IGA has just built an online order assembly center1 ; the Voilà par IGA warehouse is setting up in the Montreal area, more specifically in Pointe-Claire. An investment of over $100 million to exclusively manage online orders. An order of 50 items can be assembled in 5 minutes. For its part, Metro has also invested over $15 million in a similar center in the borough of Saint-Laurent to do the same thing. Prior to March 2020, just 1.7% of food purchases in Canada were made online. Now, by some estimates, the volume exceeds the 6% threshold in Canada. In monetary terms, we reach almost 10 billion dollars in retail sales.
For a long time, the big chains were reluctant to devote their efforts to the cybernetic market, thinking of cannibalizing their in-store sales. On the other hand, sensing the threat of Amazon acquiring Whole Foods in 2017, grocery chains were introduced to the concept of online shopping with the “click and collect” approach, but nothing more. . Knowing that from now on many people will stay at home more often, the online food war is getting tougher.
Other models are slowly emerging to provide service to consumers who wish to order online in pajamas, at any time of the day.
As major grocery chains step up their online service, ghost stores, known as dark blindsoccupy an increasingly important place in the Canadian market.
Superfast grocery delivery service Ninja just announced last week that it had secured $2.8 billion in funding to expand its footprint across Canada, including Quebec, by the end of the month. ‘year. Ninja currently has ghost stores in Waterloo and Toronto. Ninja promises delivery of its orders in 10 minutes, at most. There is no minimum order required and shipping is free for purchases over $10.
According to Ninja’s site, their delivery people have access to employer-provided e-bikes and are paid $17 an hour, plus tips. These conditions are still acceptable, since the minimum wage in Ontario is currently at $15 an hour.
These new grocery delivery companies are taking another very dynamic approach. Companies such as Gorillas, Gopuff, JOKR, Getir can be found in America and Europe. Several of them opened their doors first in European cities, then in the United States. Venture capitalists have poured billions of dollars into it over the past two years since the pandemic began.
All of these start-ups offering around 2,500 products promise speed of delivery and they largely achieve this by positioning small distribution centers in the middle of crowded urban neighborhoods.
Unlike traditional establishments, these ghost stores keep it simplistic and focus on efficient order fulfillment. Normally, customers cannot access the interior of these facilities and the windows plastered with large company advertising signs do not allow the curious to see inside the premises. Bright lighting makes it easier for attendants to see products clearly when assembling orders.
The concept of traditional stores costs a fortune to put customers at ease. For example, some spend hundreds of thousands of dollars on accent lighting alone. Also, with the effect of the pandemic and our idolatry for public health, grocers have to offer space. Ghost stores don’t need to worry about that at all. To save as much space as possible, they opt for very narrow aisles of about 1 m, one-way and marked with arrows on the ground to make it easier for grocery pickers.
The store conceptualization and strategic approach is only aimed at optimizing order fulfillment time using advanced algorithms.
We will likely see other players come into the market. But some cities like New York are opposed to the arrival of these stores en masse in the city centers. They argue that these establishments are rather warehouses that must be located in an industrial sector. These ghost stores do not embellish urban centers, according to some municipal authorities. But to deliver in 10 minutes, proximity to their customers is crucial.
Sobeys/IGA and Metro are certainly better equipped now to deal with fierce competition from these ghost stores. But 10 minutes is fast, and expectations will change over time. For the next few years, these ghost stores are likely to give major grocery chains a hard time.