The race to win e-commerce consumers in food heated up with the announcement from Loblaw on November 15 to partner with Instacart. Loblaw’s decision is no doubt driven by the threat of Amazon moving more aggressively into food.

Positives for Loblaw include a solution for convenience-driven consumers in two of their most lucrative markets: Toronto and Vancouver. These early adopters are important customers at Loblaw stores that the grocer cannot afford to lose.  These are high-margin shoppers willing to pay a premium.  How much of a premium?

Loblaw has not announced its home delivery structure yet, however Instacart’s  delivery fees offer some insight.  Their prices range from a low of $3.99 depending on the order size and delivery time, to a high of $9.99 for a one-hour delivery of an order less than $35.  On top of that, expect a service fee of 7.5 per cent of the value of the order.

Loblaw probably expects there is an opportunity to win some customers from others offering home delivery such as Walmart, Grocery Gateway and Vancouver’s service, Fresh St Market.

The pace of change is accelerating – note the December 6 rollout in Toronto -- and the move is not perfect from a Loblaw perspective. Consumers will shop online using Instacart, not Loblaw websites. This means Loblaw will not have direct contact with consumers.

The second issue for Loblaw is that consumers using this platform will not earn or be able to redeem PC points. Given the allure of PC Points, this could be a deterrent for some consumers.  Avid PC Point collectors are probably the same early adopters who would want online shopping and delivery.

Loblaw also announced it would be closing 22 stores, citing rising labour costs in Ontario and Alberta and other competitive pressures. This is nothing new as population shifts, new stores are built and some locations just become unprofitable. With more food being sold in Shoppers Drug Mart and the shift to online shopping for food, expect to see more stores closing in the future.