Walmart Canada is eliminating the pickup fee from its online grocery service as it braces for increasing competition in a business where profit margins are already razor thin.

The retail giant said Tuesday it is cancelling the $2.97 charge for customers who order groceries online and pick them up in stores.

Although the fee was modest, the company's internal studies indicated it was a barrier preventing some people from using their online grocery pickup service, said Daryl Porter, vice-president of online grocery for Walmart Canada.

"Even though it's a small dollar amount, it means something," Porter said.

"We want to remove that fee and give people a better chance to try it."

The service launched in Ottawa in July 2015, about a year after Loblaw rolled out a similar program in the Toronto area.

Expansion plan

Walmart Canada has since expanded it to the Greater Toronto Area, Calgary and Edmonton, and Porter said there are plans to bring it to a fifth market that will be unveiled in about a month.

The announcement Tuesday comes against the backdrop of Amazon's US$13.7-billion deal to buy Whole Foods, an acquisition that some industry observers say will upend the supermarket sector in North America.

"There is a lot of activity happening out there in the industry but this is something we wanted to do even before the Amazon announcement," Porter said.

Walmart Canada introduced groceries in its stores in 2006 and they are now available in about three-quarters of its 411 stores.