Loblaw Companies Ltd. launched a “curated marketplace” online that will include brands and products the company hasn’t stocked before in a move aimed at setting the retailer up to compete with Amazon and Wal-Mart for Canadian market share.

Canada’s largest grocery chain said the marketplace includes more products, as well as a broader range of vendors than what was available before. “We’ve curated an assortment of products for our customers, based on the belief they are looking for the increased convenience of buying complementary products from complementary brands while they shop with us,” wrote spokeswoman Catherine Thomas in an email.

The online marketplace is an expansion of the existing PC Express platform, which allows customers to buy groceries online and pick them up in store or opt for home delivery. The expanded offering is available to people shopping at Loblaw’s Real Canadian Super Store, Atlantic Super Store and Loblaws chains. Customers will earn PC Optimum points on purchases. The service is not yet available in Quebec.

Robert Carter, an industry adviser with The StratonHunter Group, said the idea is to get consumers to spend more at its online store. That’s why the company added big-ticket items, like cribs, into the mix. Consumers may not be thinking of Loblaw as their go-to when searching for these kinds of products right now, he said. But the company is thinking for the long-term by tapping into consumer shopping behaviour, said Carter, which trends toward wanting products immediately with as little friction as possible.

By making products beyond groceries available, Loblaw is hoping consumers will consider its online shop over, for example, Amazon, which owns the Whole Foods grocery chain, next time they need to purchase a blanket or other item.

“The opportunity is to expand beyond just that core focus and offer a wide range of products so you’re capturing more of that consumer purchase overall,” said Robert Carter. He deemed the expansion a good move that sets it up to compete with not only Amazon, but also other online retailers like furniture and home decor retailer Wayfair and Walmart.

As of November 2019, the Loblaw platform offered products like blankets, cribs and strollers. The shop will also sell additional items in the toy, home, kitchen and pet categories. New brands will include Umbra and Lennox Furniture Inc.

The company envisions giving customers the ability to buy products that complement what they've already added to their online carts. “For example, as new parents prepare for a baby with diapers and formula, they would probably find it very convenient to able to order blankets, wash cloths or even a crib through us,” said Hesham Fahmy, vice-president of digital, in a statement.

The new marketplace expands the company’s general merchandise offering, which it already sells in store, with complementary goods “that strengthen the core offering and enhance convenience and loyalty,” Irene Nattel, an analyst with RBC Dominion Securities Inc., wrote in a note. RBC doesn’t anticipate the marketplace will add a meaningful contribution in the short term, she said, but as the company expands the product assortment and the business matures “the initiative should help drive modest top line and margin growth in time.”

Loblaw’s initiative to compete directly with Amazon and Wal-Mart invites retaliation from the international giants that enjoy advantages of economies of scale, experiences of online business/home delivery service, and international reputation. The “Amazon effect” is real and it is here to stay, and is keeping most grocers up at night, including Loblaw. On Feb 26, 2020, Amazon announced the opening of a new, larger Amazon Go cashier-less grocery store in the company’s hometown. The new grocery store, at 10,400 square-feet takes the Amazon cashier-less concept to a much bigger scale. The bigger store has different merchandise on the shelves than a regular Amazon Go store. Amazon will stock 5,000 items, including produce, meat, seafood, bakery items and household essentials at the store. Business analysts expect Amazon’s large Go cashier-less grocery stores will show up in Toronto soon.

A blend between a digitalized food retailing industry and consumers’ homes is also real. All the data consumers need is readily available online, where they can also shop at their own pace. It makes consumers more rational, so impulse buying would be nearly impossible.

Suppose you were the marketing manager of Loblaw. How would you compete with those competitors and expand your business online?

Exam Questions:

1. Identify and discuss the main issues in the case. (10%)

2. Conduct a situational analysis of the case: (20%)

2a. Environmental analysis

2b. Competitive analysis

3. Discuss a solution to resolve your key issues. (10%)

4. Discuss the applicability of Market Segmentation, Target Market Selection and Positioning to your solution. (25%)

5. Detail and discuss the components and implementation of your Marketing Mix for the solution. (35%)