Loblaws expands online shopping business and raises dividend

- 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.

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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.

Previously published in Digital Journal

Dealing with customer returns an increasingly costly process for companies

Consumers prefer in-store returns no matter where the purchase was made. This creates a heavy burden on stores as many receive back items that were purchased on line in addition to those purchased in the store.

Reverse logistics

Wikipedia describes reverse logistics as follows: "Reverse logistics is for all operations related to the reuse of products and materials. It is "the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Re-manufacturing and refurbishing activities also may be included in the definition of reverse logistics..Any process or management after the delivery of the product involves reverse logistics. If the product is defective, the customer would return the product. The manufacturing firm would then have to organise shipping of the defective product, testing the product, dismantling, repairing, recycling or disposing the product. The product would travel in reverse through the supply chain network in order to retain any use from the defective product. The logistics for such matters is reverse logistics."

A retailer faced with many returned goods is faced with the cost of sending the goods back to the manufacturers or distributors at some cost. It requires quite a bit of store labor to do this. As a result some retailers hire what are called 3Pls who are in turn expensive to hire.

What are 3PLs?

Wikipedia describes third-party-logistics (3PL) as follows: "Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company's use of third-party businesses to outsource elements of the company's distribution and fulfillment services."

Either reverse logistic method is costly to the retailer and could impact profits.

Experts make suggestions

Carly Llewellyn, Senior Director of Marketing and Communications at Optoro warns that retailer should carefully consider their methods in dealing with returns: "The biggest factor is strategic. What’s the role of your store? Is it a showroom, a traditional brick-and-mortar outlet or an omnichannel hub? Retailers that operate their stores as showrooms or more traditional brick-and-mortar outlets need to have DCs play a larger role."

"DC" stands for distribution center described as follows: "A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products (goods) to be redistributed to retailers, to wholesalers, or directly to consumers...A typical retail distribution network operates with centers set up throughout a commercial market, with each center serving a number of stores. Large distribution centers for companies such as Wal-Mart serve 50–125 stores. Suppliers ship truckloads of products to the distribution center, which stores the product until needed by the retail location and ships the proper quantity."

Pete Madden, director of Alix Partners said that stores that sell to walk-in customers as well as offering buy-on-line services, pick up in store or ship from store options have more factors to consider when it comes to returns.

Llewllyn notes: "We have seen retailers focus on improving their returns process as part of a broader effort to create better experiences across the entire customer journey, Some retailers report as much as 90% of online returns happening in stores instead of through the mail, so the store obviously plays a critical role in returns management. There is no silver bullet. What we have seen is that retailers are investing in technology solutions that can support both in store and DC returns management. Everyone is looking to improve returns management in all locations. Forward-thinking retailers have identified the stores as a priority for improvement, because there is a huge opportunity to minimize costs across the network and get to the optimal disposition the fastest."

Retailers no doubt could make it more difficult to return purchases but such a tactic might save money on the returns end of the business but lose disgruntled customers. Such a tactic might also help competitors with more liberal returns policies to gain some of their customers.

Shopping on line

About one third of shoppers claimed they shopped less online if returns were likely to be a hassle. A recent survey also showed that shoppers under 30 preferred to return items to a brick-and-mortar store. The study also showed that 56 percent of shoppers were more likely to shop with a retailer on -line if the retailer allowed free returns and didn't require a return label to be printed. The cost to the consumer in time and or money to return items shows that reverse logistics is important for on-line retailers.They will need to weigh the costs of a liberal return policy against the benefits in keeping and attracting customers.

Previously published in Digital Journal