Amazon stokes Canadian grocery wars with expansion

Canadian shoppers can now buy groceries and auto parts in the same online grocery cart as their books and holiday toys on Amazon.ca, a move by the powerful online retailer that threatens to further shake up the retail industry.

Amazon.ca launched a grocery and auto-parts store on Thursday, upping its new category offerings to 14 so far this year.

The addition of baked goods, fresh flowers and car electronics comes as the retail industry heads into the critical holiday eating and giving season.

While greater selection is good news for consumers and could mean lower prices, it puts an even tighter squeeze on Canadian-based retailers already struggling with increased competition from American-based companies.

The added pressure has led to further consolidation in the sector so far this year. That includes the $12.4-billion offer made this summer by Loblaw, Canada's largest supermarket chain, to buy Shoppers Drug Mart, the country's biggest retail pharmacy chain. Weeks earlier, Sobeys Inc. said it was buying Safeway's Canadian assets for $5.8 billion.

The deals will help these companies cuts costs are share products to better compete with Wal-Mart and the recent entrance of Target into Canada, both of which sell groceries alongside other discounted products.

The impact that these larger players is having on Canadian retailers in evident in the sector’s stunted profit growth since early 2012. A recent report from TD Bank says retail trade corporate profits grew 0.5 per cent in the past six quarters. That compares to 12.8-per-cent growth between 2002 and 2007, just before the 2008-09 recession.

Amazon.ca’s decision to beef up its online offerings also comes as more Canadians choose to shop using the Internet.

Canadians bought $18.9 billion worth of goods and service online last year, which up 24 per cent from 2010, according to a survey released this week by Statistics Canada.

StatsCan says 56 per cent of Internet users bought something online last year, up from 51 per cent two years earlier, and spent an average of $1,450. The average online shopper also made 13 transactions, the study shows.

Travel bookings (58 per cent) and tickets for events (52 per cent) were the most sought-after products by the online shoppers surveyed. Eighteen per cent bought groceries online in 2012, which is up from 11 per cent in 2010.

Still, the survey says online shopping accounting for just 4 per cent of total retail sales of $470 billion last year.

Of course, online retailers such as Amazon.ca hope to boost that figure when the next survey is rolled out.