It is just before lunchtime, and Walmart Canada chief executive officer Gonzalo Gebara is watching keenly as customers browse through the dumplings, sandwiches and rotisserie chickens at a newly opened service counter.
The ready-made meals are one part of an expanded assortment of fresh foods at this recently renovated Walmart location at the Square One shopping centre in Mississauga, Ont.
Walmart Canada is nearly four years into a five-year, $3.5-billion plan, which has involved revamping roughly two-thirds of its 400-plus stores so far, opening new distribution centres to speed up its supply chain, and investing in technology. Roughly 30 stores will be renovated this year.
“The investments that we have been talking about are [going into] remodelling the stores, mainly to bring this up,” Mr. Gebara said, gesturing around the grocery section. This store offers more fresh foods than the average location, and represents where the business is headed, he says.
Walmart’s share of the Canadian grocery market sits at about 7.5 to 8 per cent, Mr. Gebara said, and has increased compared with last year. The stores perform better than average on categories such as dry goods and global foods, while it lags in areas such as meat and produce. Changing that is among Mr. Gebara’s priorities.
The grocery section is one important piece of the modernization. While its profit margins are much slimmer than other categories – particularly the kinds of non-essential purchases that inflation-weary consumers are cutting back on right now – it is a high-volume business.
Grocery shoppers visit stores more frequently, and that traffic can drive sales in other departments. Shoppers who come for their milk and bread might be more likely to pick up dog food and paper towels, or be lured by a display of frying pans or coffee makers.
This is a particularly fraught time for Walmart to be trying to woo more grocery shoppers. Canadians have been hit hard by food inflation over the past couple of years. And while the rate of growth in grocery prices has slowed on an annual basis (and prices have fallen very slightly, by less than 1 per cent, on a month-to-month basis recently) consumers are still struggling with a punishing new normal in the cost of food.
Shoppers are watching their budgets more closely as a result and retailers have been competing hard for their business. Grocers have reported increases in traffic to discount stores such as Loblaw Cos. Ltd.-owned No Frills and Maxi, and Metro Inc.’s Food Basics and Super C. The country’s largest grocer, Loblaw – which has been a target of criticism over food inflation and has faced calls to boycott its stores – is now testing smaller-format No Frills stores to draw in more customers in urban centres.
Walmart has been trying to win over those customers too, running ads this year featuring a couple ecstatically abandoning their mountain of coupon-clipping from other grocers, in favour of the chain’s low-price promises. Grocers are also seeing a shift to cheaper house brands, and Walmart’s private label sales, such as in its Great Value line, are growing 1.5 times faster than name brands.
But the company has not been exempt from the controversy around food inflation.
Mr. Gebara was among the grocery executives called to appear before a parliamentary committee examining the issue. More recently, that committee sent a letter to Walmart and Loblaw urging them to join others in committing to sign on to a voluntary code of conduct to govern relationships between retailers and their suppliers. After some negotiations over changes to the code, Loblaw announced last month that it would sign, as long as its competitors do the same.
Walmart has received the revised version of the code, “and we’re looking at it,” Mr. Gebara said.
Still, Walmart’s decision in 2020 to impose new fees on its suppliers, to offset investments in stores and its e-commerce network, contributed to renewed calls for an industry code. Asked whether it was fair to ask vendors to kick in for its own investments – a decision that preceded him – Mr. Gebara said the company negotiates deals that are “good for both,” and that its relations with them are positive.
“I don’t think this is a relationship that carries a lot of controversy,” he said.
Some of those investments have gone into meeting the demand for online shopping – including new distribution centres with more automation, and upgrades to pickup and delivery operations at stores. In Mississauga, an expanded “staging” area in the back of the store is filled with outgoing orders, and a screen tracks online sales for the day and the average waiting time for each pickup.
“Our digital business is going to grow faster than the physical, no question about it,” Mr. Gebara said. But over all, it still accounts for slightly less than 10 per cent of Walmart Canada’s business. After all the talk during the pandemic of an e-commerce revolution, “we’re seeing exactly the opposite,” he said.
After having remodelled so many stores, the company is now looking to open more new stores as well. Three new locations have been approved in the past month.
“We’re going back into store growth mode,” Mr. Gebara says. “We will continue to work and find ways that we can bring more Walmarts to more places in Canada.”
