The Canadian grocery market continues to transform in response to changing habits, demographics and new technologies.
The rise in online grocery shopping post-pandemic, coupled with strong brand loyalty among consumers, is shaping new shopping patterns. This landscape is further complicated by the increasing competition from non-traditional outlets like dollar stores and pharmacies, as well as the growing influence of e-commerce giants and third-party delivery platforms. Such changes are not only altering consumer behaviour but also compelling traditional grocery retailers to adapt and innovate to maintain their market position in this dynamic environment.
Below we highlight four recent trends in the Canadian grocery retail market.
Online Sales Continue Their Upward Trend
In Canada, online grocery shopping experienced a resurgence in 2023 after a decline in 2022. Approximately one-third of Canadian shoppers now engage in online grocery shopping, but less than 5% do most or all of their shopping this way. Mintel forecasts suggest that online grocery shopping will continue to be more of a supplementary option rather than a replacement for in-store shopping through 2025 to 2027.
Younger consumers are more likely to shop online, with almost half having bought groceries online. This points to a generational preference for online shopping, although it’s unlikely to become their primary shopping channel.
When considered in isolation from wider Canadian online shopping trends, grocery shopping in Canada is set to remain a significant, yet not dominant, part of the retail landscape.
However, it’s also noted that the increasing prevalence of delivery services is starting to neutralize the location advantages that brick-and-mortar stores traditionally held. This suggests that the competitive landscape in Canadian grocery retail is rapidly evolving, with a clear impact from shifting demographics and consumer preferences.
Demographics are a Key Factor in Retail Preferences
In recent years, the Canadian grocery retail demographics have broadened particularly concerning shopping habits and preferences of various ethnic groups. Notably, major retailers like Walmart and Costco have seen a skew towards Asian Canadian customers.
In 2022, we noted that Chinese Canadians showed a preference for imported produce. This trend indicates a deep-rooted cultural inclination towards specific food items that are traditionally not part of the local Canadian produce.
Moving into 2023, this preference has further solidified, with about three-quarters of Chinese shoppers being more likely to patronise stores specialising in international products. This shift underscores the growing importance of cultural diversity in shaping the Canadian grocery market.
Another significant demographic trend in Canadian grocery retail is the high proportion of pickup orders coming from a specific section of the population. These customers are typically employed, have higher incomes, and are homeowners. This group represents a coveted demographic for grocery retailers due to their spending power and consistent purchasing habits. This trend towards pickup orders affords more opportunities for in-store traffic, providing a competitive advantage for traditional retailers over online-only platforms.
Brand Loyalty
Brand loyalty plays a significant role in the Canadian grocery market, especially among shoppers who utilize both in-store and online platforms. Most of these consumers report that they typically shop from the same stores or brands, whether online or in-store. This trend is further reinforced by the popularity of pickup orders, as consumers often travel to a specific store’s location to collect their online purchases, thereby strengthening their connection to the store or brand.
Additionally, the use of loyalty programs is widespread among Canadian shoppers, with almost 90% participating in loyalty schemes. Customers using loyalty points often return to the same retailer due to the incentives provided by these programs.
However, this strong sense of brand loyalty is being challenged by expanding competition in the grocery sector. As consumers are presented with new ways of buying and a wider range of products, they face new competing tensions of choosing between loyalty to the retailer or loyalty to the branded product.
As a result, retailers are required to constantly innovate and improve their offerings to maintain customer loyalty in an increasingly competitive market.
Increased Competition
The Canadian grocery market is experiencing intensified competition due to the entry of non-traditional retailers and the rise of e-commerce. Dollar stores and pharmacies are expanding their grocery offerings, competing for both customer traffic and average basket size. This trend is transforming these outlets into convenient one-stop shops for consumers.
E-commerce giant Amazon is also reshaping the grocery landscape with its online services and innovative stores like Amazon Go, challenging traditional grocery shopping models. Established retailers like Walmart and Costco are responding by enhancing their grocery delivery services, leveraging their large customer bases.
Additionally, third-party apps such as Instacart are becoming increasingly influential. While they offer a platform for various retailers to sell their products online, they also risk creating a brand disconnect, as shoppers may begin to view the app as their primary shopping destination rather than the actual retailer.
Looking Ahead With Mintel
The Canadian grocery retail sector continues to evolve due to online shopping growth, increased competition, demographic changes, and shifting brand loyalties.
Even as E-commerce becomes increasingly important, physical stores remain essential for certain customer groups.
Diversity in the consumer market is leading to a growing preference for international products, forcing traditional retailers to adapt. Brand loyalty, supported by loyalty programs, remains a key competitive edge for many retailers but even this is under threat from the challenges presented by a wider range of shopping choices. This competition threatens to reshaping the market. Innovation and customer experience remain the key drivers to ensure brands stay competitive and relevant.
Stay informed with cutting-edge retail market research to help you respond to these trends and thrive in this dynamic environment.
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