The Rise of Dark Stores and Online Food Delivery in Canada is Here to Stay: Op-Ed

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SkipTheDishes has just announced it is building 38 dark stores across the country to support its online food delivery strategy. This is yet another sign that online food delivery in Canada is here to stay.

We learned recently that SkipTheDishes is building 38 dark stores across the country to support its e-commerce renewal, which includes selling food online, like any other grocery store. Company CEO Kevin Edwards claims that the online food market will be worth $120 billion in a few years. That number is a little ambitious, but many observers believe online retail revenues could reach $25 billion by 2025. This could very well mean that about 10% of all the food purchased at retail in Canada could be bought online in just a few years.

Online food retailing is booming, no matter what some may say about grocery shopping being an irreplaceable experience. The pandemic has made a compelling case for empowering a stranger to do the work for you, even at a fee. While some may find it more convenient, others don’t have a choice due to a chronic or permanent ailment.

The Angus Reid Group reported that in the last month, 19% of Canadians ordered food from a retailer online. Before the pandemic, most online orders were for curbside pick-up. Not anymore. The split between door-to-door delivery and curbside is almost 50/50. So, offering a delivery service is increasingly becoming a competitive advantage. For food service and restaurants, that user rate goes up to 28%. In fact, SkipTheDishes is currently fulfilling about 400,000 orders a month. In March 2020, before the pandemic, the number of orders per month was less than 20,000. If any company has an idea of how much online food ordering has grown, it’s certainly SkipTheDishes.

Like anything else though, the way to support an e-commerce strategy is slowly evolving. Before the 2017 Amazon-Whole Foods deal, grocers considered e-tailing a nuisance, a distraction, and even a way to cannibalize revenues. When the American giant acquired Whole Foods, that’s when we saw an array of click-and-collects popping up everywhere. The click-and-collect model is more of a test balloon if you will, and not a full commitment to the development of a comprehensive online platform. The industry needed a decent push to commit to a more sustainable cybernetic approach. Over the last two years, that push has come from COVID.

Now, companies are thinking about the last mile, the middle mile and micro-fulfillment, like the use of dark stores. A dark store is a location which has the sole purpose of supporting a company’s e-commerce distribution strategy. Such a location doesn’t serve customers on-site, as it is designed to fulfill online orders only for a localized market. We are expecting more, but SkipTheDishes is the first company to make it an explicit point that dark stores are very much part of its strategy moving forward.

But anyone who has ordered food online knows that fees are often added to the bill, anywhere between $4 to $12, depending on where you live, the size of your order, and which provider you use. SkipTheDishes intends to offer some deliveries for free, for orders of $25. As the market matures, food delivery services will need to think about how to democratize the service to eliminate fees for those who need to order online. For people who are physically or even mentally compromised, or people who need to quarantine, service charges are simply a regressive tax. As we learn to live with viruses and other unfortunate public health challenges, access to online food delivery services can be an asset only if they don’t penalize those who have no other option, temporarily or permanently.

The labour market will look quite different from how it looked in March 2020. Based on some estimates, about 70% of the Canadian workforce will be working from home at least 5 days a month or more by the end of 2022. It means more of us will spend more time at home and will feel less inclined to leave the house to do errands like grocery shopping. Shopping online between video calls will be quite convenient for a growing number of people.

If you still don’t get the online food shopping phenomena, ask someone under the age of 40, preferably someone who has children. You’ll understand.

Article Author

Sylvain Charlebois
Sylvain Charlebois
Dr. Sylvain Charlebois is Senior Director of the Agri-Foods Analytics Lab at Dalhousie University in Halifax. Also at Dalhousie, he is Professor in food distribution and policy in the Faculty of Agriculture. His current research interest lies in the broad area of food distribution, security and safety, and has published four books and many peer-reviewed journal articles in several publications. His research has been featured in a number of newspapers, including The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.

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