Currently loblaw and wal mart overlap only slightly

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Unformatted text preview: ignificantly less than the 93.2 percent market share held in 1994. A real threat to traditional grocers is the possibility of Wal-Mart, and other nontraditional outlets, such as Shoppers Drug Mart and Save-on-Drugs, moving more broadly into the Canadian market. Currently, Loblaw and Wal-Mart overlap only slightly. In the United States, however, Wal-Mart is experimenting with its first full-fledged supermarket that could give the giant discount retailer an even bigger piece of the huge grocery business. “Wal-Mart Food and Drugs Express” includes a drive-through pharmacy, a deli counter, a produce section, and aisles for such merchandise as health and beauty aids. One analyst predicts Wal-Mart will be the largest U.S. food retailer by 2004. For the moment, Wal-Mart has denied rumors concerning its intent in Canada. However, WalMart has expanded the food sections at some stores in Ontario. The addition of refrigerated grocery products—including milk, cheese, juice, and hot dogs—has some observers anticipating the introduction of Wal-Mart’s “supercenter” format to Canada. Supercenters are divided between groceries (32%) and general merchandise (68%). Should Wal-Mart develop the supercentre (130,000 sq. ft.) concept within Canada, it is likely that regional chains, such as A&P (Canada) and Metro-Richelieu Inc., would be harder hit than national chains and/or those with robust private labels. Wal-Mart is renowned for its technologically sophisticated distribution system and its ability to control its costs. Wal-Mart is well known for its low distribution costs. Should Wal-Mart decide to enter the Canadian grocery market, Loblaw will be ready with plans for squeezing inefficiencies from its cost structure especially in the area of distribution. To enter Canada successfully Wal-Mart would need prime locations, which in 1998 were not readily available, especially in the Ontario market. Loblaw is monitoring the availability of advantageous real estate. Another possibility would be for WalMart to acquire an existing chain. Other competitors include the large drug chains, such as Shoppers Drug Mart, who sell grocery produce as loss leaders and use dry foods as a replacement for tobacco products. Relatively new competitors are the warehouse clubs (e.g., Costco) offering a wide range of products with minimal service at deep-discounted prices. According to AC Neilsen, the number of shopping trips to warehouses increased in one year by 21 percent and spending increased by 19 percent during the same period. 14 n KPMG/University of Illinois Business Measurement Case Development and Research Program July 1999o Box 4 Internet Shopping Internet shopping for groceries is not extensive in Canada. In the United States, NetGrocer (see Box 4) has pioneered its introduction (using FedEx for delivery). As of December 31, 1997, statistics were not yet available on the scale or profitability of an online grocery store. In 1997, a survey conducted by The Canadian Grocer found that 12 percen...
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