Teaching Casea

Digital Transformation of Grocery Retail: Loblaw1

Ron Babinb and Yudi Li, Ted Rogers School of Management, Toronto Metropolitan University

Abstract
The case aims to provide a well-rounded discussion on the impact of digital transformations in the
grocery retail industry. As one of the sectors that has been most heavily impacted by the COVID-19
pandemic from 2020 to 2022, grocery retail offers a unique opportunity to examine the role of emerging
technologies in helping companies to navigate through abrupt changes. Through the analysis of
“Customer Relationship Management and Loyalty”, “Online Purchasing and Delivery”, “Inventory
Management, Supply Chain and Distribution”, and “Information Systems”, this case examine pioneers
and leaders to understand how they are driving changes using digital technologies in the grocery retail
industry.
This case has been prepared for instruction purposes only. Information within this case has been
collected from public sources only. No internal Loblaw interviews or documents have been used to
prepare this case.

Key Words
Digital Transformation, Disruptive Innovation, Grocery Retail

Situation
In February 2022, the financial year closed for 2021 with strong growth and profitability for Loblaw,
despite a second year of the COVID-19 pandemic. Loblaws demonstrated a very successful year, with a
share price increase of 68% from a low of $60 in February 2021 to a new high of $101 in February 2022.
However, the past success of over 100 years, is not a predictor of future returns. To remain competitive
and successful, the Loblaw group of companies must continue to adopt a digital business model. As
researchers have pointed out:
“Evolving consumer attitudes and behaviors, technology advances, new competitive pressures,
and laser thin margins – accelerated by the COVID-19 pandemic – are driving digital
transformation in the grocery business. … Retailers are connecting their investments [in digital
grocery ecosystem] to enhanced customer loyalty, revenue, and ultimately profit.”2
In May 2021, Galen G. Weston became Loblaw president replacing Sarah Davis who retired from Loblaw
after 14 years of service.3 Mr. Weston is the third generation of his family to oversee the Loblaw
Companies Limited, with a controlling ownership through George Weston Limited. Galen’s grandfather
W. Garfield Weston acquired Loblaws in the early 1950s and asked his son W. Galen Weston to revive
the struggling Canadian grocery chain. “Reinventing Loblaws” began in the mid-1970s with a complete
rebranding and repositioning that proved to be extremely successful over the next four decades.4
In March 2021, “George Weston Ltd. announced … it would be selling Weston Foods to focus on retail
and real estate.”5 The departure of the Weston family bakery business that had begun in Toronto in the
1880s, marked a strategic directional change.

a
Teaching notes are available from the corresponding author
b
Corresponding author, Dr. Ron Babin rbabin@ryerson.ca

Electronic copy available at: https://ssrn.com/abstract=4138488

These two significant events reflect the changing focus of Loblaw and the organizational commitment to
succeed as the dominant Canadian retailer. Competing against global retail giants such as Walmart and
Amazon, and with the dramatic increase in online shopping, the key challenge for Loblaw would be its
ability to transform and reinvent itself, as it had done before.
The key question on the minds of shareholders, customers and employees is this: Can Loblaw become a
successful digital retailer?

The Loblaws Company

Founded in 1919, Loblaws Inc. is a Canadian supermarket franchise that is owned by parent company
Loblaw Companies Inc. As the largest food retailer in Canada, Loblaw has a vision to help Canadians
“Live Life Well” by providing the best product and service in food, health, and beauty.
As of 2021, Loblaw operates over 2,400 stores across Canada and is located within 10 kilometers of 90%
of Canadians.6 For the fiscal year ending in January 2021, Loblaw reported $52.7 billion in total revenue,
a 9.7% growth compared to the previous year.7 Net earnings for the 2020 fiscal year were $1.19 billion.
The same store sales grew by 4.9% for drug retail and 8.6% for food retail.8 Loblaw’s success can be
partially attributed to its ongoing commitment to innovation and digital transformations. Throughout the
last decade, the company has made several major efforts to position itself as a digital leader in the food
retail industry, making them a Digirati of digital maturity. For example, a multi-cloud strategy allowed
Loblaw to transform its PC Optimum loyalty program, migrate its IT infrastructure to the cloud, and
launch its click-and-collect program PC Express.
Exhibits 1 provides Loblaw’s revenue growth patterns from 2012 to 2020, showing growth of 66% over
nine years. Exhibit 2 breaks down the market share of the Canadian grocery market in 2019-2020. With
just over $50 billion in annual grocery sales Loblaw dominates the market with a 45% share, larger than
its next three competitors combined.
Loblaw clearly recognizes the importance of digital technologies, as described in the 2020 annual report
(p. 38):

Electronic Commerce and Disruptive Technologies. The Company’s e-commerce

strategy is a growing business initiative. Customers expect innovative concepts and a
positive customer experience, including a user-friendly website, certain websites and
customer offerings that are integrated with the Company’s loyalty program, reliable data,
safe and reliable processing of payments and a well-executed merchandise pick up or
delivery process. If systems are damaged or cease to function properly, capital investment
may be required. The Company is also vulnerable to various additional uncertainties
associated with e-commerce including website downtime and other technical failures,
changes in applicable federal and provincial regulations, security breaches, and consumer
privacy concerns. If these technology-based systems do not function effectively, the
Company’s ability to grow its e-commerce business could be adversely affected. The
Company has increased its investment in improving the digital customer experience, but
there can be no assurances that the Company will be able to recover the costs incurred to
date.
Loblaw operates a separate organization, Loblaw Digital, to manage and accelerate the transition to a
digital retailer. The Loblaw Digital website (loblawdigital.com) highlights four digital projects, which
include:
“Online Grocery - For time-strapped Canadians, where shoppers can pre-order groceries
online for easy pick up when and where it’s convenient.

Electronic copy available at: https://ssrn.com/abstract=4138488

 PC Optimum - The merging of two of Canada's favourite loyalty programs to create PC
Optimum. Shoppers Optimum, a mature program synonymous with loyalty in the Canadian
market with over 11 million collectors, and PC Plus, a relatively young loyalty program in
Canada but widely adopted with over 8 million collectors.
Joe Fresh - JoeFresh.com was the first online business launched at Loblaw Digital- a multi-
million-dollar transactional site to help grow Joe Fresh to be the best performing online
apparel business in Canada.
Online Beauty by Shoppers Drug Mart - Beautyboutique.ca launched in 2015 represented
the third online business launched by Loblaw Digital.”9
Background on Grocery Retail
The grocery sector of the retail industry has experienced several transformative changes since the
conceptualization of supermarkets in the 1900s. More recent changes have been powered by the
emergence of digital technologies such as Artificial Intelligence (AI), robotics, and cloud computing.
Increased adoption of mobile and digital technologies has introduced a new form of cross-industry
competition. Empires such as Amazon and Alibaba have created fierce competition for all businesses as
consumers are now comparing digital shopping experiences across all industries. Businesses are no longer
held solely to their industry standards and must remain agile in their practices to stay competitive. With
millennials and other tech-savvy groups emerging as major consumers, brick-and-mortar grocery retailers
are focusing on eCommerce components and initiatives to deliver quality omnichannel experience to meet
the changing customer demand.
The COVID-19 pandemic has accelerated the shifting trend of e-commerce-as-a-priority. Digital pure
players and last mile businesses, such as Instacart, are also disrupting the traditional grocery business
model by leveraging their advantage of lower operating costs to increase consumer reach. In addition to
convenience and efficiency, customers enjoy competitive pricing and access to wider selections of
products when shopping for groceries online. AI and data analytic tools also allow e-grocers to offer
customized suggestions to consumers based on their shopper behaviour, further improving the customer’s
shopping experience while driving additional sales.
A 2022 US market report highlights the significant growth in online grocery purchases, noting that
“nearly three quarters of shoppers say they’re e-grocery users”. Competition for online grocery shoppers
is dominated by the retail giants: “Walmart stands well ahead of Amazon as consumers’ main destination
for online grocery shopping”.10
Data from The Strategic Counsel on “Trends in Internet Use and Attitudes” show that in 2021, on
average, 31% of shoppers prefer to order groceries online and pickup in-store while 21% prefer to order
online and have their groceries delivered. Exhibit 3 provides a detailed breakdown of online grocery
shopping across all Canadian provinces. One obvious impact of the Covid-19 pandemic has been the
increased shopping at global eCommerce retailers such as Amazon, by 52%, and at traditional ‘bricks and
mortar’ retailers that also have online stores, such as Loblaw, by 30%.11
Loblaw cannot ignore the overwhelming trend of online grocery shopping, particularly from direct
competitors such as Walmart. Indeed, Loblaw identified information technology and eCommerce as top
risks, after the Covid-19 pandemic, in the October 2021 Third Quarter Report to Shareholders12, as
follows:
“Numerous risks and uncertainties could cause the Company’s actual results to differ
materially from those expressed …Such risks and uncertainties [a list of 17] include:
2. the inability of the Company’s IT infrastructure to support the requirements of the
Company’s business, or the occurrence of any internal or external security breaches,

Electronic copy available at: https://ssrn.com/abstract=4138488

 denial of service attacks, viruses, worms and other known or unknown cybersecurity or
data breaches;
3. failure to execute the Company’s e-commerce initiatives or to adapt its business model
to the shifts in the retail landscape caused by digital advances;
4. failure to effectively respond to consumer trends or heightened competition, whether
from current competitors or new entrants to the marketplace”
Current competitors such as Walmart and new entrants such as Amazon, have considerable size and
investment in digital technologies that will heighten competition in Canada with Loblaw. The four
following business areas below reflect areas where Loblaw has already, and must continue to, concentrate
focus and investment to compete with these formidable organizations in a disruptive digital competitive
marketplace:
1. Customer relationship management and loyalty
2. Online purchasing and delivery
3. Inventory management, supply chain and distribution
4. Information systems

Business area 1: Customer relationship management and loyalty

Customer relationship management (CRM) is both the practice and the supporting information systems
and digital technologies that allow a company to know and understand their customers, both as
individuals and as demographic groups. A strong CRM capability allows a company to anticipate
customer purchases and to suggest additional purchases that may fit their lifestyle and preferences.
Companies such as Netflix and Amazon have created significant CRM capabilities that offer customers
new products before the customer even knows the product exists. CRM has been a distinguishing
feature for these successful digital disruptors.
The traditional grocery business is not like Netflix or Amazon, customers typically come to the retail
store and are anonymous; they arrive, fill their carts, pay, and leave. Customer loyalty programs such as
Airmiles or Aeroplan rewards have allowed retailers to track who buys what and when. Loblaw
implemented its own President’s Choice (PC) Plus loyalty program in 2013 at 44 Loblaw stores in
Ontario, and quickly introduced it to other banners such as Real Canadian Superstores and No Frills. At
the time, analysts saw the PC Plus program as an opportunity to focus on “shoppers who make more trips,
shop bigger baskets and shop across more categories.”13 As well, analysts saw the opportunity to merge
the vast collection of data to develop a comprehensive view of customer purchase habits, especially with
the acquisition of Shoppers Drug Mart.
As a large population of Canadians age into the Seniors category and the younger generations become
more health conscious, the health and wellness industry has been experiencing a major bloom. Loblaw
saw this as an opportunity and strategically acquired Canada’s biggest pharmacy franchise, Shoppers
Drug Mart, in 2013. 14 This alliance provided the 100-year-old grocer access to over 1,200 drug stores
across the country. Compared to Loblaw’s big-box retail stores, most of the Shoppers’ network is
comprised of smaller stores located in populated metropolitan areas. This acquisition gave Loblaw the
opportunity to access a larger network of customers, as well as the ability to offer a wider range of
products. Both Loblaw and Shoppers had their own trusted rewards programs prior to the acquisition, and
they were ranked as first and third most popular loyalty programs in Canada, respectively.15 To provide a
seamless and convenient experience and further enhance customer loyalty, the two rewards programs
were merged into the new PC Optimum program in 2017. The 18 million members of the new rewards
program are now able to accumulate and redeem points both offline and online by using their either their
App, rewards card, or a PC Financial credit card.

Electronic copy available at: https://ssrn.com/abstract=4138488

To take customer engagement to the next level, Loblaw leveraged its partnership with Microsoft in
incorporating AI solutions into the new rewards program.16 As profile and transaction data are collected,
they are stored and processed in real-time on the cloud platform, Azure. By moving data onto the cloud, it
is no longer siloed and allows for Microsoft’s predictive AI technologies to analyze shopping patterns and
behaviours. This large-scale analysis allows the retailer to offer its members personalized and tailored
deals and events, driving customer engagement by establishing a stronger and closer relationship with its
shoppers. This ultimately encourages recurring sales and larger profits.
In 2018 Loblaw introduced an upscale loyalty program called PC Insiders, with an annual subscription fee
of $99. PC Insiders is modeled on the Amazon Prime loyalty program. As many CRM experts have
pointed out, there is tremendous “customer lifetime value” from building a strong and enduring
relationship with customers, based on accurate, detailed, timely and voluminous data. Loblaw is well on
its way to doing just that.

Business area 2: Online purchasing and delivery

The grocery retail industry has traditionally been a laggard in the adoption and advancement of digital
transformation efforts. The concept of online grocery was first pioneered in 1996 by the California-based
e-commerce company, Webvan.17 Its delivery service was powered by a distribution centre consisted of
automated carousels and conveyor belts, a facility that was considered cutting-edge at the time.18 The
company remained in operations for three short years before declaring bankruptcy due to its aggressive
expansion agenda in an unfavourable market. At the time, online sales only contributed to 1.3% of the
total grocery sales in U.S. 19 While companies like Amazon and Walmart continued to trial the e-grocery
model over the next decade, others remained skeptical.
Loblaw entered the e-grocery market through the introduction of its click-and-collect program “PC
Express” in 2014, in which customers can shop online and pick up their items in store. This service was
first piloted in three stores and is now available at over 700 locations across Loblaw grocery stores,
Shoppers Drug Mart stores, and at GO transit stations in the Greater Toronto Area (GTA). This wide
network of pickup locations means the service is only ten minutes away from three quarters of
Canadians.20
In December 2017, Loblaw added delivery options to its PC Express program by partnering with the
grocery delivery company, Instacart. After placing their orders through the PC Express app or online at
PCExpress.ca, customers can have their groceries picked by employees and delivered for a flat fee of
$9.95.21 Orders can also be collected in-person at designated pick-up locations for a service charge of
$3.99 on weekdays and $5.99 on weekends.22 To further bolster customer loyalty, Loblaw launched PC
Insiders, a subscription program that allows customers unlimited access to PC Express services. Like
Amazon Prime’s model, PC Insiders can be subscribed on a monthly or annually commitment. Members
can accumulate more reward points from their purchases than non-members can.
While PC Express offers customers a convenient and efficient way to shop for groceries, many have
noted its drawbacks. First, convenience comes at a cost to customers. The delivery or pick-up fees can
quickly add up for those who shop on a weekly basis. Additionally, items may be out of stock when the
order is being fulfilled, leading to substitutions and possible disappointments. Furthermore, same-day
pick-up or delivery options are not always available, leaving those in dire need of certain items having to
find alternative solutions.
Despite these challenges, Loblaw’s online grocery division continues to grow and expand. In 2019,
Loblaw opened its first standalone PC Express store in downtown Toronto, providing nearby condo
dwellers the accessibility to pick up their orders without having to go into a busy grocery store.

Electronic copy available at: https://ssrn.com/abstract=4138488

Loblaw’s commitment to digital capabilities proved its value when the COVID-19 pandemic
fundamentally changed the landscape of the grocery retail industry. At the onset of the pandemic, the food
and beverage subsector in Canada experienced a jump of 107% in online sales.23 22% of Canadians
reported that they are buying more groceries online as a result of the pandemic.24 Although grocery sector
remains open as an essential service, a large share of customers shifted to online shopping to avoid face-
to-face contacts amid lockdowns. As stated by Loblaw’s then President Sarah David, “2020 was
complicated, with many shifts in dynamics”. Loblaw’s perseverance through the pandemic can largely be
attributed to its strategic investments of three customer-centric pillars: “Everyday Digital Retail”,
“Payments and Rewards”, and “Connected Healthcare”. To support the changing customer demand, the
Everyday Digital Retail strategy quickly scaled up its PC Express services by making the services more
affordable and accessible to customers. In 2020, Loblaw reported $2.8 billion of e-commerce sales, a
growth of 280% from the previous year.25 Overall, Loblaw experienced a growth of 9.7% in total revenue
and 8.6% in food retail.
This rapid growth presents a set of challenges and risks to the company. Loblaw states this risk in their
2020 annual report (p. 36):
“The COVID-19 pandemic has changed consumer behaviours and accelerated the
advancement of disruptive technologies and has resulted in a significant increase in e-
commerce competition. The Company’s inability to keep up with the pace of such
behavioural changes or technological advancements or with its competitors could adversely
affect the Company’s operations or financial performance.”

In 2020, Loblaw announced a partnership with Gatik to pilot the use of autonomous vehicles to deliver
groceries.26 The first five trucks, fitted with refrigeration units, were set to begin operations in Toronto in
early 2021. The vehicles will operate 12 hours a day and will carry a human driver co-pilot as a safety
precaution. When the autonomous vehicles are fully operational, they will pick up PC Express orders and
deliver them to designated pick-up locations for customers.
Loblaw’s expansion in e-commerce presents challenges for its retail locations. The company states the
following in their 2020 annual report (p.38):
“The retail landscape is quickly changing due to the rise of the digitally influenced
shopping experience and the emergence of disruptive technologies, such as digital
payments, drones, driverless cars and robotics. In addition, the effect of increasing digital
advances could have an impact on the physical space requirements of retail businesses.
Although the importance of a retailer’s physical presence has been demonstrated, the size
requirements and locations may be subject to further disruption. Any failure to adapt the
Company’s business model to recognize and manage this shift in a timely manner could
adversely affect the Company’s operations or financial performance.”

As acknowledged by Loblaw, the company is always looking to innovate as a way to maintain its
competitive standing in the industry. To adapt to the increasing demand of online grocery shopping,
Loblaw collaborated with Google Cloud partner, Takeoff Technologies, to build and pilot its first micro-
fulfillment centre (MFC) in one of Loblaw’s Real Canadian Superstore locations in Toronto.27 MFC uses
a combination of robotics, AI, and Cloud to fulfill online PC Express orders within the existing retail
location. When an online order is received, the robotics-enabled automation system gathers the items
around the store and brings them to store associates (human employees) to package. The AI-powered
robotics system can pick over 500 items an hour, which is ten times faster than the traditional manual
approach by store employees.28

Electronic copy available at: https://ssrn.com/abstract=4138488

With 2,400 retail stores across Canada, this fulfilment model effectively blends its online and offline
assets to expand its capacity in fulfilling the increasing amounts of online orders without having to build
and invest in warehousing centres.
Loblaw intends to provide “sustained leadership in digital retail” as the company continues to innovate.
The amalgamation of its online and offline components, or omnichannel strategies, will continue to be the
focus in the short and long run.

Business area 3: Inventory Management, Supply Chain and Distribution

Inventory management and the supply chain and distribution systems that keep groceries in stock are
critical. All efforts such as personalized promotions and convenient online shopping will be diminished if
the product is out of stock when the customer is ready to buy.

The grocery industry has an out-of-stock rate of 8% for general groceries and over 10% for promotional
items. This means that grocers are losing about 10% of their revenue due to out-of-stock issues. On the
other end of the inventory management spectrum, over-stocking is also major challenge in this industry as
it results in higher inventory costs and product wastage. Research by the US Natural Resources Defense
Council (NRDC) found that $15 billion worth of produce is wasted by US grocers because of over-
stocked and expired inventories. 29 This creates a huge concern for environmental sustainability.
Although they are not yet widely adopted, AI and data analytics have been used to help grocers to combat
this challenge.

The tech company Fellow Robots designed a set of autonomous robots named NAVii, which uses a
combination of visual recognition technology and machine learning to manage inventories in retail stores.
Built-in cameras on the robots allow them to scan items and consequently identify out-of-stock or
misplaced items. The information such as aisle number and product details are reported to store associates
through their dashboards. Lowe’s Home Improvement has adopted the NAVii robots in their stores,
rebranded as the LoweBot.30 Relying on AI and data analytics for inventory management is an effective
use of digital technologies as it is more efficient and accurate than human capital. For larger grocers like
Loblaw and Walmart that have large quantities of data, AI-enabled algorithms and data analytics tools can
be effective in analyzing the historic sales patterns to predict inventory demand. As sustainability and
corporate social responsibility becomes an increasingly important element in the reputation of a brand,
utilizing such digital technologies will help grocers to lower product wastage and reduce the negative
impacts to our environment.

The Loblaw’s annual report (2019, p.42) identifies the importance of Distribution and Supply chain:
Distribution and Supply Chain. The Company’s ability to satisfy its customers’
demands and achieve its cost objectives depends on its ability to maintain key logistic
and transport arrangements. The Company’s distribution and supply chain could be
negatively affected by unforeseen disruptions due to fire, severe weather conditions,
natural disasters, or other catastrophic events, labour disagreements, or other shipping
problems. The loss of or disruption to these types of arrangements could interrupt product
supply, which in turn could adversely affect the assortment and product availability at
store level. If not effectively managed or remedied, these events could negatively impact
customer experience and the Company’s ability to attract and retain customers and could
adversely affect the Company’s operations or financial performance.

Electronic copy available at: https://ssrn.com/abstract=4138488

The 2020-2022 Covid pandemic presented a harsh challenge for all retailers, and for their supply chain
operations which often rely on human labour. Loblaw identifies this risk in their 2020 annual report (p.
36):

“Changes in the Company’s operations in response to COVID-19 could materially impact

financial results and may include temporary closures of facilities, temporary or long-term
labour shortages or disruptions, temporary or long-term impacts on supply chains and
distribution channels, temporary or long-term restrictions on cross-border commerce and
travel including mandatory quarantine periods, greater currency volatility, and increased
risks to IT systems, networks and digital services. In addition, the COVID-19 pandemic
has changed consumer behaviours and accelerated the advancement of disruptive
technologies and has resulted in a significant increase in ecommerce competition.” …

“Governmental interventions aimed at containing COVID-19 could also impact the

Company’s available workforce, its supply chain and distribution channels, the products
and services it is able to offer and/or its ability to engage in cross-border commerce.”

Business area 4: Information systems (IS)

The ability of an organization to rapidly change, whether in response to Covid 19 or in response to a large
new competitor such as Walmart or Amazon, relies increasingly on the Information Systems (IS)
capabilities. IS includes the traditional hardware, software and communications technology, but also
includes the people, the methods and processes, as well as the management and leadership of the IS
division. In the past decade Loblaw has significantly enhanced its IS technologies, processes, and
people, to support the digital transformation of the organization.
Advanced Technology – ERP Migration, Cloud Transformation and Artificial Intelligence
According to the OECD cloud computing is now the third most invested IT effort by organizations across
the globe.31 By outsourcing to established cloud providers, organizations can avoid hefty investment in
IT infrastructures and mitigate concerns on data storage and security. The ease of scaling on demand has
also made this option attractive to businesses in every industry. By paying a monthly service fee to a
cloud provider, the company avoids large capital outlays to build and operate its own computer centre; the
Capital Expense (Cap-Ex) costs for a computer centre become Operating Expenses (Op-Ex).
The implementation of AI in the PC Optimum program is the first of many initiatives Loblaw wishes to
accomplish through its partnership with Microsoft (MS) in its multi-year digital transformation journey.
As its annual traffic increases to over one billion across all stores, the existing enterprise resource
planning (ERP) platform of SAP HANA Enterprise Cloud could no longer handle large queries in a
timely manner. Recognizing that a robust ERP platform is an operational backbone in providing efficient
and reliable transactions, Loblaw turned to Microsoft for an upgrade. In less than six months, the team
migrated critical applications such as the Customer Activity Repository (CAR) from the legacy SAP
environment to virtual machines on MS Azure. This migration allowed Loblaw to manage and configure
its own ERP platform instead of relying on the external teams at SAP. As the CAR is a critical system in
receiving sales data from its stores to manage inventories, Loblaw’s IT team mindfully designed the
environment to be more reliable, allowing for a faster recovery in case of system failures. The migration
to Azure also allowed Loblaw to be more agile in setting up new systems. With the control over their own
environment, work that may have taken weeks or months can now be completed in just a few days.32
The IT team at Loblaw understands the value of outsourcing in the maintenance of their IT infrastructure.
The costs associated with team expansion and onsite data centres as a result of increased IT demand do
not have an ideal return on investment. In terms of IT outsourcing, Loblaw strategically adopted a multi-

Electronic copy available at: https://ssrn.com/abstract=4138488

cloud approach to diversify its portfolio and takes advantage of different cloud solutions, including cloud
services from both Google and Microsoft. Recognizing the security and performance Google Cloud
Platform (GCP) offers, Loblaw migrated its online grocery website from SAP Hybris to Google’s
infrastructure. Keeping agility in mind, the migration only took six months to complete, which is half of
the time compared to similar-sized migrations onto the cloud. This migration resulted in performance that
is four times faster and the website can now handle three times more traffic than before. This cloud
migration further demonstrated profound value when the e-commerce site experienced unprecedented
traffic after the pandemic struck. As the number of online shoppers drastically increased, the website
started to have performance issues. Loblaw quickly worked with teams at GCP to implement measures
such as the Black Friday Cyber Monday protocol, allowing the website to stabilize and continue to offer
seamless shopping experience for their customers. 33
To further improve customers’ online shopping experience, Loblaw turned to technology firm Digitate to
automate its IT operations. Automation powered by AI allows for a faster turnaround time for IT-related
issues such as website downtime or glitches with online orders. In addition, the company has experienced
increased cross functional collaboration between internal teams since the cloud migration as the virtual
platform lessens communication barriers between employees. The positive change of culture creates a
feedback loop in encouraging more innovations by the retailer.34
IS Organization
Many companies have recognized the importance of new customer facing digital services, that allow
mobile secure transactions at any time of the day. Many banks and retailers have adopted this approach.
At the same time, traditional information systems that run the back-office of an organization, such as
accounting, payroll, supply chain and inventory management, require a different approach when they are
serving internal departments and not the outside customer. Many companies have created two distinct IS
organizations to focus on these two very different IS services.
To focus on the external customer Loblaw created the Loblaw Digital organization.
The internal Information Technology (IT) Division continues to develop and support transaction
processing and management information systems (TPS and MIS). One example is the Pharmacy
Dispensing and Management System for Shoppers Drug Mart. The system manages high value
pharmaceutical inventory, allocates and records client purchases, and keeps accurate records on client
prescriptions. The system was implemented at all Shoppers Drugmart stores in 2018 and 2019. Loblaw
also introduced “an initiative to promote patient adherence to medication via refill reminders and digital
refills.”35 The roll out of this initiative to all stores was to be completed in 2020.
Loblaw Digital began as a separate eCommerce division in 2012 and became a separate business
organization soon thereafter. As IT World Canada reported “Loblaws created and in-house ecommerce
start-up and won an award along the way” as Loblaw Digital won a 2018 Digital Transformation award.
According to the head of Loblaw Digital: “The division’s secret … is that it essentially functions like an
in-house start-up with enterprise-level resources.”36
Loblaw Digital has created four customer-facing digital services:
1. Online grocery – Loblaw’s PC Express service allows customers to order online and then pick-up
groceries at a line and location that is convenient to the customer. This sounds simple in concept
but is not easy to build and implement. The customer interface, designed for mobile technology
such as an iPhone, must be intuitive, friendly, accurate and secure. The customer app must link
to the store inventory management system and seamlessly connect to payment systems. As well,
the ability to track and anticipate customer orders, knowing the customer preferences etc., will
allow Loblaw to distinguish itself in a very competitive grocery market.

Electronic copy available at: https://ssrn.com/abstract=4138488

 2. PC Optimum – When Loblaw acquired Shoppers Drugmart, a critical issue was the need to
combine the President’s Choice (PC) customer loyalty program with the Shoppers Optimum
customer loyalty program. An innovative app was designed and deployed to support over 10
million customers, tracking and rewarding purchases at all Loblaw and Shoppers retail
operations, at more than 2400 stores and e-commerce sites.
3. Joe Fresh – JoeFresh.com is an online business (B2C) that sells exclusive Joe Fresh apparel. As a
digital business parallel to the physical Loblaw retail stores, this innovative e-business is
successful adjunct to the bricks-and-mortar grocery and pharma stores.
4. Online Beauty by Shoppers Drug Mart – similar to the Joe Fresh apparel e-business, this online
retail operation (beautyboutique.ca) sells luxury beauty products.
Loblaw’s Future Success

As the retailer giant continues to experience rapid growth, Loblaw now faces digital challenges familiar to
many retailers. How to combine excellent in-store service and selection with highly efficient 7-by-24
digital shopping and delivery? Will these different channels compete, or can they complement? Should
all Loblaw retail banners including Shoppers DrugMart, No Frills, Zehrs, Provigo and others, participate
in the same online shopping service or will each adopt a different model that is appropriate to their
market? Will Loblaw be able to compete with other national grocers, such as Sobeys’ Voila service or
Metro’s online grocery service? Finally, as a national grocer can Loblaw compete with the growing
global dominance of competitors such as Walmart and inevitably with Amazon?

Sadly, in April 2021, W. Galen Weston passed away at the age of 80.37 He was instrumental in creating
the successful Loblaw of today. His son, Galen G. Weston now holds the responsibility for the next
generation of Loblaw’s success.

Interestingly, in January 2022, Galen G. Weston launched a new digital brand platform, #HeyPC, to
gather customers’ perspectives. The YouTube short video “What’s your #HeyPC Story?”38 shows the
new Loblaw CEO is adept with digital customer communications.

Will the entire Loblaw organization be equally adept at digital transformation?

***

Electronic copy available at: https://ssrn.com/abstract=4138488

Exhibit 1. Loblaw’s annual revenue from 2012 to 2020 (in billions CDN dollars).39

55
52.71

50
48.04
46.3 46.59 46.69
Revenue in billion Canadian dollars

45.39
45
42.61 COVID-19 Pandemic

40

35
32.37
31.6

30

Acquisition of
Shoppers Drugmart
25
2012 2013 2014 2015 2016 2017 2018 2019 2020

Exhibit 2. Canadian Grocery Market Share in FY 2019-2020 40

Canada Safeway Next four largest

Overwaitea 4% 4%
Group
4%
Federated
Cooperatives
9%
Loblaw
Companies
45%
Metro
11%

Sobeys
23%

Electronic copy available at: https://ssrn.com/abstract=4138488

Exhibit 3. Preferences for online grocery ordering over traditional grocery stores in 2021. 41

Online order and in-store pickup Online order and delivery

45%
42%
41%
40% 38%

35%
31%
30% 30%
30% 29%
28%
Share of respondents

27%
26%
25%
21%
20% 20% 20% 20%
20%
17%
15% 15% 15%
15% 14%
12% 12%

10%

5%

0%
Manitoba Prince Edward Nova Scotia British New Brunswick Alberta Saskatchewan Quebec Ontario Newfoundland Average
Island Columbia & Labrador

Electronic copy available at: https://ssrn.com/abstract=4138488

Endnotes

1
This case has been prepared for teaching purposes only. Information in the case has been derived solely from
published sources. The interpretation and perspectives presented in this case are not necessarily those of
Loblaw Companies Ltd. or any of its employees.
2
Abbu, H. et al, (2021). The Case of Digital Transformation in Grocery Business: A Conceptual Model of Digital
Grocery Ecosystem, IEEE International Conference on Engineering, Technology and Innovation.
3
Canadian Grocer, (2021, March 3). “Sarah Davis retiring May 6”. Accessed at https://canadiangrocer.com/loblaw-
president-sarah-davis-retiring-may-6
4
George Weston Limited (N.D.), Out History, “Reinventing Loblaws”, accessed at
https://www.weston.ca/en/pdf_en/GWL_History_Reinventing_Loblaws.pdf
5
Canadian Grocer, (2021, March 3). “Sarah Davis retiring May 6”. Accessed at https://canadiangrocer.com/loblaw-
president-sarah-davis-retiring-may-6
6
Loblaw Companies Limited (2021, February 24). 2020 Annual Report. p8.
7
Loblaw Companies Limited (2021, February 24). 2020 Annual Report. p1.
8
Loblaw Companies Limited (2021, February 24). 2020 Annual Report. p7.
9
Loblaw Digital (2021), accessed at https://www.loblawdigital.co/
10
Redman, Russell, (2022, February 4), Walmart, Amazon lead as consumers’ online grocers of choice.
Supermarket News, https://www.supermarketnews.com/online-retail/walmart-amazon-lead-consumers-online-
grocers-choice
11
The Strategic Counsel (2021, April). “Trends in Internet Use and Attitudes – Findings from a survey of Canadian
Internet Users”, p.49. Prepared for the Canadian Internet Registration Authority (CIRA). Accessed at
https://static.cira.ca/2021-07/CIRA%202021%20Canada's%20Internet%20Factbook%20Report-public.pdf
12
Loblaw Companies Limited, Third Quarter Report to Shareholders, October 9, 2021, p.3
13
“Loblaw Brings PC Plus rewards program to No Frills”, Canadian Grocer, September 17, 2014
14
Bowden, L., (2018, March 19). “Loblaw and Shoppers Drug Mart”, Ivey Publishing Case W14251.
15
Kolm, J. (2017, November 8). Loblaw to merge PC Plus and Optimum programs. Strategy Online., accessed at
https://strategyonline.ca/2017/11/08/loblaw-to-merge-pc-plus-and-optimum-programs/
16
Redman, R., (2019, June 12). “Loblaw teams up with Microsoft on digital transformation”, Supermarket News.
Accessed at https://www.supermarketnews.com/retail-financial/loblaw-teams-microsoft-digital-transformation
17
CNN Money, (1999, November 30). Webvan to open distribution centers in four new markets; stock rises.
https://money.cnn.com/1999/11/30/technology/webvan/
18
Rory, M., Christensen, C., Yang, R., & Hollingsworth, T. (2014, July). AmazonFresh: Rekindling the Online Grocery
Market. Harvard Business School Case 615-013.
19
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research survey. International Business Times. https://www.ibtimes.com/exclusive-preview-supermarkets-must-
digitize-groceries-attract-young-wealthy-research-1411062
20
Laird, K. (2019, February 22). Digital strategy paying off for Loblaw. Canadian Grocer.
https://www.canadiangrocer.com/top-stories/headlines/digital-strategy-paying-off-for-loblaw-85814
21
PC Express. Online grocery that really delivers. https://www.pcexpress.ca/delivery
22
PC Express. Online grocery. In-store pickup. Freshness guaranteed. https://www.pcexpress.ca/pickup
23
Aston, J et al. (2020, July 24). Retail e-commerce and COVID-19: How online shopping opened doors while many
were closing. https://www150.statcan.gc.ca/n1/pub/45-28-0001/2020001/article/00064-eng.htm
24
Mintel (2020, August 20). Over a fifth of Canadians have bought more groceries online due to COVID-19.
https://www.newswire.ca/news-releases/over-a-fifth-of-canadians-have-bought-more-groceries-online-due-to-
covid-19-844596662.html
25
Loblaw Companies Limited (2021, February 24). 2020 Annual Report. p7.

Electronic copy available at: https://ssrn.com/abstract=4138488

26
Shecter, B., (2020, November 23). “Loblaw testing autonomous grocery vehicles in bid to conquer supply chain’s
‘middle mile’”, Financial Post. Accessed at https://financialpost.com/news/retail-marketing/loblaw-testing-
autonomous-grocery-vehicles-in-bid-to-conquer-supply-chains-middle-mile
27
Redman, R. (2019, November 13). “Loblaw tests micro-fulfillment for online grocery”, Supermarket News.
Accessed at https://www.supermarketnews.com/online-retail/loblaw-tests-micro-fulfillment-online-grocery
28
Google Cloud. (n.d.). Loblaw: Building customer loyalty through better shopping experiences.
https://cloud.google.com/customers/loblaw
29
Gunders, D. (2012, August). Wasted: How America Is Losing Up to 40 Percent of Its Food from Farm to Fork to
Landfill. NRDC. https://www.nrdc.org/sites/default/files/wasted-food-IP.pdf
30
Gannon, M. (2017, August 23). “Fellow Robots’ NAVii autonomous retail robot helps Lowe’s improve service”,
The Robot Report. Accessed at https://www.therobotreport.com/navii-autonomous-retail-robot-fellow-robots-
helps-lowes-improve-service/
31
OECD (2019). Measuring the Digital Transformation: A Roadmap for the Future. OECD Publishing, Paris.
https://doi.org/10.1787/9789264311992-en
32
Microsoft, (2020, October 6). “Loblaw Companies migrates critical ERP workloads to Azure, boosts stability,
performance”, accessed at https://customers.microsoft.com/en-gb/story/825085-loblaw-companies-limited-
retailers-azure
33
Google Cloud, (N.D.). “Loblaw: Building customer loyalty through better shopping experience”. Accessed at
https://cloud.google.com/customers/loblaw
34
Digitate, (2019, April 9). “Canada’s Leading Retailer, Loblaw, Transforms IT Operations with ingio”, accessed at
https://digitate.com/newsroom/canadas-leading-retailer-loblaw-transforms-it-operations-with-ignio/
35
Loblaw Annual Information Form (AIF) 2019, February 20, 2020, p12
36
Wood ,E., (2018, August 14). “How Loblaws created and in-house ecommerce startup – and won an award along
the way”, ITBusiness.ca. Accessed at https://www.itbusiness.ca/news/how-loblaws-created-an-in-house-
ecommerce-startup-and-won-an-award-along-the-way/103115
37
Austen, I. (2021, April 26). “W. Galen Weston, Who Transformed a Family Food Empire, Dies at 80”, The New
York Times, accessed at https://www.nytimes.com/2021/04/26/business/w-galen-weston-dead.html
38
YouTube, “What’s your #HeyPC Story?”. Accessed at https://www.youtube.com/watch?v=Iubuh4rd8AM
39
Source: Loblaw annual reports 2012 to 2020
40
Source: Chain Store Guide (CSG) Directory of Supermarket, Grocery & Convenience Store Chains 2020
41
Source: The Strategic Counsel (2021, April). “Trends in Internet Use and Attitudes – Findings from a survey of
Canadian Internet Users”, p. 99.

Electronic copy available at: https://ssrn.com/abstract=4138488