Loblaw takes Target as a potential competitor, at least as hinted by its president in a recent interview with analysts. Yes it is true competition in the retail space gets tougher, but I still can't picture Target and Loblaw fight side by side.
In the same interview, Loblaw talked about getting new Canadians as a strategic priority for the long term. It sounds good, but there are a few things they need to watch in the execution.
First of all, offering ethnic food is not the same as getting ethnic customers. The T&T acquisition a couple of years back did add some ethnic flavor to Loblaw's shelf. However, T&T itself is becoming more of a destination for the non-Asians to shop for Asian fares than a grocer of choice for Chinese Canadians, particularly when you look at the shopper mix at T&T's downtown Toronto and newest Yonge & 16th locations. It is fair if Loblaw means to offer more diverse flavors to their mainstream customer base. However, if their goal is to get more ethnic customers, they need to think about their execution strategy again.
Second, when you talk about competing for ethnic customers, you can not limit your sights to the large national chains. I won't hesitate to bet that all the mainstream grocery stores will cumulatively lose market share to the fast growing ethnic food stores, if their change stops at comparing the ethnic food offerings in their stores only with their traditional competition. This took me back to an irrelevant research I looked at a while ago. Between 2000 and 2006, all the Canadian banks together gave up market share in the small business lending sector, especially lending to small agricutural businesses, to the non-banking finance companies and international banks, by a significant percentage, partially due to oversight. Echoing to that point, a 2010 industry report from a CIBC World Markets analyst revealed that the ethnic grocery stores have been imposing a meaningful impact to the mainstream grocery stores in geographies like Greater Toronto Area. The new competitive landscape makes direct competition against ethnic grocers inevitable for the mainstream chains.
Third, how would Loblaw fight against the authentic ethnic grocery stores such as Foody Mart? My answer is capital. Needless to say, the ethnic stores have competitive advantage in customer insights (even though Loblaw has T&T intelligence) and cost (think about the overhead and labour costs for a freelance photographer vs a full blown studio). Loblaw's strength is that it could afford opening more stores more quickly. Since I moved from the Markham/Scarborough border to Thornhill, I keep going back to that area for grocery shopping, because Foody Mart, Oriental and the other Chinese grocery stores have larger and better product selections at more appealing prices, comparing to T&T. However, T&T still gets a decent share of my wallet, only because its new Richmond Hill store is close to my home.
Interesting article...many changes are faced by Loblaw. An additional challenge is of course the North American palate. In some cases, Canadians now strive to become foodies- loyally watching the food network every night, highlighting their Jamie Oliver cookbooks and buying ingredients that differ greatly from those purchased by shoppers in the eighties. Add to that, the Canadian Shoppers now buying more mass produced/ packaged food than ever before without worry over how mass produced/ treated the food is. I see the palate also playing a role in how Loblaw must market itself going forward.
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