Two of Canada’s largest retailers said Wednesday they are launching and expanding grocery home delivery, but using quite different models and price points.

Loblaw Companies Limited announced a partnership with Instacart to provide a premium service, delivering groceries in as little as an hour, and at a premium price.

The service, launching in Toronto Dec. 6, will charge a delivery fee, plus a service fee of 7.5 per cent of the order. The delivery fees will start at $3.99 and will vary depending on the size of the order and the delivery time selected.

Shoppers will be able to buy online from Loblaws, Real Canadian Superstore and T&T stores.

They will shop using Instacart’s website and mobile phone app, and the groceries will initially be priced higher than those purchased online through Loblaw’s existing Click & Collect program or in-store, although efforts are being made to keep that price difference as slight as possible, according to an Instacart spokesperson.

Walmart Canada, which has been testing grocery delivery in the Toronto area since the spring, said it will expand the program in December, using crowd-sourced delivery services Daily Delivery and JoeyCo. It will also use Walmart trucks.

Only next-day delivery is available through Walmart. There will be a single fee of $9.97 for orders over $50. Groceries will be ordered from the Walmart.ca website and will not be priced higher than items in store.

“We’re an efficient operator,” said Walmart Canada Corp. spokesperson Al Roberton.

Walmart grocery delivery is already available in Milton and some downtown Toronto neighbourhoods. In December, the service will be expanded to Walmart customers in Oshawa, Oakville, Markham and Mississauga.

Roberton said it’s too early to say whether the rollout will be expanded across Canada.

“We’re doing it one market at a time. We want to make sure we get it right for the customer in each market.”

Walmart customers can choose from 15,000 items on the website.

Walmart Canada began its expansion into groceries in 2006 and now 331 of its 410 stores are supercentres offering groceries.

The grocery delivery service for Walmart customers in Canada is being driven by an executive from the global retailer’s ASDA operation in the U.K.

Charlie Stewart, director e-commerce operations for Walmart Canada Corp., worked with online groceries in the U.K. marketplace for five years prior to coming to Canada three years ago. He said Canadian customers have been responding “fantastically well” to grocery delivery.

Galen G. Weston, chairman and chief executive officer, Loblaw Companies Limited, announced the grocery delivery initiative at Canada’s largest grocer during an earnings call with analysts on Wednesday.

He also announced 22 store closures. Locations were not disclosed.

“2018 is shaping up to be a difficult year,” Weston said.

This is the first international expansion for Instacart – founded by a Canadian in San Francisco in 2012, and active in more than 150 U.S. marketplaces.

“I grew up in Canada and know firsthand the appeal of these supermarkets and brands,” said Apoorva Mehta, founder and CEO, Instacart. “I also know that our Instacart technology and service will meaningfully add to their appeal and convenience.”

Nilam Ganenthiran, chief business officer, Instacart, said the two companies have spent a lot of time over the past two years getting to know each other.

“We’re very glad it’s resulted in this partnership,” said Ganenthiran. “Our perspective is that Canada has been dramatically underserved from an e-commerce perspective and grocery delivery in particular.

“I think really, the entire grocery sector is uniting to face a new competitive threat in Amazon – that is the real competitor here, in our opinion.”

Loblaw Cos. Ltd. operates nearly 2,500 stores under banners including Shoppers Drug Mart. About 1,100 are grocery stores.

At launch, the delivery service area in Toronto will include Scarborough, Mississauga, North York, Richmond Hill-Markham, Toronto, Toronto West and East York – about 1.4 million households, according to Ganenthiran.

Home delivery will be introduced to nearly 600,000 homes in the Greater Vancouver Area in January, and rapid expansion to additional markets across Canada is expected.

At launch, customers will visit instacart.ca or download the Instacart app, pick from a local store’s online inventory of as many as 30,000 products, and choose a delivery window.

Products will be hand-picked by people working for Instacart in the Loblaw Cos. stores.

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Ganenthiran said Instacart is by far the largest grocery e-commerce player in the U.S.

“We were the pioneer,” he said, adding that in the beginning, the founder did all the jobs himself – including coding at night and grocery picking by day.

Instacart has been able to attract a significant amount of long-term venture capital, and while it is in no rush to list publicly, they are building a business that could eventually go public, said Ganenthiran.

In the U.S., Instacart allows shoppers to shop from a variety of stores, including Costco, but for now Instacart’s only partners in Canada will be Loblaw brands.

Canadian grocers have been slow to introduce grocery delivery and Canadians have been slow to take it up – with the exception of Grocery Gateway, operated by Longo Brothers Fruit Markets Inc.

The family-owned Longos made a significant investment in expanding that business last year, tripling the size of its Grocery Gateway warehouse in Etobicoke. It purchased Grocery Gateway in 2004.

Other competitors include InstaBuggy, which offers grocery deliveries in Toronto from retailers including FreshCo, Sobey’s Urban Fresh, Pet Smart, Costco Wholesale and Summerhill Market.

Urbery, a former competitor in the field, has exited grocery home delivery and is focusing on working with large consumer packaged goods companies to enable direct-to-consumer purchasing.

Loblaw is beating Amazon.ca and other competitors to the punch, however.

While AmazonFresh grocery delivery service is available in numerous U.S. cities and internationally, it is not available in Canada.

The cost in the U.S. is $14.99 per month, in addition to the annual Prime membership fee. Members get unlimited free delivery on orders over $50, while the fee for smaller orders is $9.99.

Amazon does sell tens of thousands of non-perishable grocery and gourmet food items on Amazon.ca, a spokesperson said. In addition, it recently added Whole Foods 365 products, many of which are Prime-eligible with free same-day delivery in Toronto.

Metro Inc., with 133 grocery stores in Ontario – 46 in the GTA – offers grocery delivery in the Montreal, Quebec City and Outaouais areas, but not Toronto. Deliveries are next-day and the minimum fee for delivery is $8.50.

Sobeys has not launched a comprehensive grocery delivery program.

“Where some grocers had been hesitant to push too hard, too quick, into online, we are now seeing a rapid shift to a much greater emphasis on developing the online offering,” said Ryan Fisher, a partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm.

“Online ordering with in-store fulfillment is no longer the future of grocery, it is what is required to be relevant now.”

He added that the right model to fulfill orders most efficiently is still a work in progress.

And the emerging trend of home delivery meal kits presents a growing opportunity as well, to expand the online grocery space, according to Fisher.

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