As Walmart ploughs ahead with aggressive Supercenter expansion across Canada, the local players have begun to accept that aiming for price leadership is not worth the battle.
Instead, they are now exploring smarter ways of competing for shopper dollars, ranging from basic improvements in store design to more sophisticated approaches to merchandising.
The most recent example is Metro, Canada’s fourth-largest food retailer, which is teaming up with marketing services company Dunnhumby in an attempt to better understand its shoppers and improve the relevance of its offer.
In a drive for customer loyalty, Metro will now to seek to emulate the success enjoyed by Tesco and Kroger by using shopper data to customise its stores.
As Canada’s first retailer to partner with Dunnhumby, Metro will have an edge not only over Walmart, but its domestic rivals such as Loblaw and Sobeys.
The move mirrors what happened in the US about five years ago. With Walmart encroaching on its turf, Kroger turned to Dunnhumby to differentiate it from the competition. Kroger has since experienced 7% annualised growth, thanks to what chief executive David Dillon refers to as its “secret weapon”.
However, the threat Walmart poses in Canada is much worse than the US, given the rate at which Walmart is able to convert its existing network of discount stores to the more profitable, grocery-led Supercenter format.
It has gone from operating seven Supercenters in 2006 to 69 stores today and there are an additional 250-odd stores that could be converted over time. The divestment of warehouse club chain Sam’s Club in Canada will also allow for additional resources for Supercenter expansion.
So Canadian grocers are in a race against time to find innovative ways of retaining shopper loyalty. Loblaw, which is fighting hard to retain its number one position, recently reported its first negative like-for-like figure this year (down 0.6% for the third quarter). Lower levels of food price inflation have had an impact, but Canada’s largest retailer is the most exposed to the Walmart threat due to an overlap in product and internal issues such as a high cost structure and on-shelf availability.
Improvements in price perception will remain high on the agenda for Loblaw and its domestic peers but, as Metro will hope to prove, success can only come to those that place their shoppers at the core.