Retail Management MGMT3054-01

LOBLAWS CASE STUDY:

RETAIL STRATEGY
MGMT 3054-01
PROFESSOR
JEFF HAYES

Student:
Jennifer Fellinger

Fanshawe College
November 27, 2013

Retail Management MGMT3054-01

Loblaws Mission
Loblaws mission statement is to be Canadas best food, health and home retailer by exceeding customer
expectations through innovative products at great prices.

What business are we in

Loblaw Companies Limited (Loblaw) is

Canada's largest food retailer and a leading
provider of drugstore, general merchandise and
financial products and services.

What should business be in the future

Loblaws aim is to use their own scale and

influence as a force for positive change on the
issues that matter most to customers,
colleagues and business. Loblaw is committed
to being socially responsible by respecting the
environment, sourcing with integrity, making a
positive difference in community, reflecting
nations diversity and being a great place to
work.
Health and Wellness: Empowering Canadians
to make healthier food choices and supporting
them on their journey to a healthier lifestyle.
Environmental Footprint: Collaborating with
stakeholders to develop waste reduction
programs with a focus on food waste, recycling
and packaging

What are our capabilities

Loblaw offers different kinds of stores so

customers can choose which ones meet their
needs best. For example, Great Food stores
offer an exciting shopping experience with an
outstanding food selection. Superstores give
customers great value and convenience, all in
one place. Hard Discount stores lead when it
comes to price, offering customers exceptional
value and self-serve wholesale stores offer
value and convenience to small businesses and
the public.
With 30 distribution centers and the largest
fleet of trucks in Canada, Loblaw supply chain
network makes sure that every store across the
country has the fresh products and supplies that

Retail Management MGMT3054-01

our customers need. Loblaw constantly works
to improve the efficiency of supply chain in an
effort to ensure that the freshest products get to
customers, quickly and at the lowest cost.
Innovation is at the heart of Loblaws offering.
No name and Presidents Choice brands were
breakthrough ideas in retailing. Today, Loblaw
has more than 5,000 private label products that
provide customers with healthy, organic,
environmentally friendly and high-value
alternatives. Loblaw offer the Joe Fresh
collection (affordable apparel and accessories),
Joe Fresh beauty products (stylish cosmetics)
and Joe Fresh bath products (an exciting range
of bath and body products).
Loblaw Presidents Choice Financial division
offers customers innovative and cost-effective
alternatives for banking, credit services,
insurance plans and mobile phone services, as
well as one of the most popular retail loyalty
programs in Canada PC points.
What do we want to accomplish

Loblaw Companies Limited (Loblaw), one

of Canada's largest private sector employers,
has been named one of Canada's Top Greenest
Employers, by Mediacorp Canada Inc, for the
second consecutive year. Loblaw achieved this
notable recognition for its industry leading
green initiatives and its success in integrating
environmental values into its corporate culture.
Some accomplishments in 2010 include:
-

Helping protect Canadas oceans

Reducing the use of plastic shopping
bags
Reduced energy consumption
Improved fuel efficiency
Increased waste diversion
Fostering green advocates
Increasing our greener options

Retail Management MGMT3054-01

Situation Audit
Market Factors
Size
51.5 million square feet
Growth
With the massive amount of continuous improvements and new product implementations, its safe to say
Loblaw is doing pretty well in the growth category. Their innovativeness and strategic moves as far as game
play is concerned are exceptional, with control brand products and expansion of their PC Financial customers of
about one million new applicants. The future is looking good if you take into consideration their material has
sustained positive trends in areas that are of great importance and also accelerated in the last quarter, as well as
in the first seven weeks of this year.
Seasonality
Loblaw follows a wide range of specific products in accordance with the seasons we experience. As a result the
impact to their products is altered on a seasonal basis. With an increase in their general merchandise, Loblaw
will also increase their seasonal items.
Business Cycles
The Peak of a business cycle is approximately where Loblaw is at this time. The peak of a companys cycle is
usually within the final month of the expansion phase and usually retail sales and the number of employed
people tend to decrease.

Competitive Factors
Addressed Barriers to Entry
Threat of New Entrants Low/Moderate
The threat of new entrants is associated with existing entry barriers as well as with saturation of grocery retail
industry; many players, low profit margin, and low growth rate.
Examples of current barriers
Economies of scale: Loblaw has it within sourcing and distribution.
Capital requirements: Capital is a requirement for the purchase of physical space and setting up their
operation, although it wouldnt be a barrier for a large player.
Loblaw is resetting their general merchandise section with differentiated product assortments that are on a
points system at the weekly food shop in 78 of their stores.

Retail Management MGMT3054-01

Just last year Loblaw had made progress in an important accomplishment. This was to invest in and expand
their fresh product assortment for competitive prices and provide the necessary training that would benefit the
customer, giving them a more positive shopping experience.
Competitive Rivalry and Bargaining Power of Vendors
Loblaw has a strategy that is all about continuing to add more competition to themselves, with more products
associated with non-food and the ones with food products. This has now made drug stores, specialty stores,
supermarkets, warehouse clubs, mass merchandisers, as well as grocery stores, all part of Loblaws competitive
rivalry. Consumers bargaining power is in the middle, even though most customers are loyal and the food prices
already low, but customers require products of a high level of quality. Furthermore, the suppliers power would
increase by enlarging its market share. Building a good relationship between supplier and mega-grocery is
important for both of them to develop. Finally, the industry is highly competitive; there were large numbers of
competitors and substitutes in the industry. Above all, despite the difficult sustainability of the grocery industry,
the profit is attractive. In order to sustain, this corporation needs to achieve scale advantages, product
differentiating, build their image and introduce more integrative product lines.

Environmental Factors
Addressed Technology
A national point of sale system was addressed in 2012, and they also reached key milestones within their IT
department that same year. Their first distribution center went live on their new fully integrated systems and this
strategy had no impact on customers, the inability of the Companys IT infrastructure to support the
requirements of the Companys business; More than 3,800 banking machines across Canada Helping PC
Financial customers do their banking at their convenience
Technological factors: new technologies such as RFID.
Economic
Process management, integration of store management
Loblaw has a very strong private label which increases customer loyalty private brands have a stronger
growth rate than regular brand.
Economic: need to watch for the possible changes and trends in economy that may affect buying habits such
as recession, etc.
Grocers would benefit from techniques such as vertical integration as supplier/distributor, innovative
technologies like RFID, and global expansion. The grocery industry is heavily commoditized, as well as
competitive. Being the current Canadian market leader, Loblaw has a strategy that integrates low cost with
product and process differentiation and focuses on a broad target market. Through their multi-banner approach,

Retail Management MGMT3054-01

their core competencies and low cost from an economies of scale advantage is their leverage across multiple
businesses.
Regulatory
Changes in the Companys income, commodity, other tax and regulatory liabilities including changes in tax
laws, regulations or future assessments;
Canadian food retailing reached a high point of $66.8 billion in 2002 but the margin of the supermarket is the
lowest of all the industry. In order to increase bargaining power at the demand side, Canadian grocery stores
were often involved in mergers and acquisitions.
Political-legal: there is no real political or legal regulations that affect the supermarkets, remaining ethical in
their daily practices are what Loblaw already does.
Social Factors
They strive every day to make a positive impact on their communities as well as their country and planet. Also,
their big belief in Corporate Social Responsibility is part of that difference. With customer satisfaction
increasing by 3 points in 2012, Loblaw announced a new product line position inside JC Penney which was to
start March 2013. They have many plans including accelerating competitiveness by acting out in a manner that
fulfils not only a culture thats more proactive, as well as responsive, but also their obligations such as
managing expenses and costs in a way that consumers could be essentially saving as well.
Socio-cultural: In Canada we are known as creatures of habit. Many of us are repeat customers, even if it is
in our routine and we are not fully Loblaw supports local economies, and donates millions of dollars
annually to charitable causes.
Colleagues Named among the Top 100 Employers, Top Employers for Young People, Best Employers for New
Canadians and Best Diversity Employers

Strengths and Weaknesses

(SWOT Analysis After Store Management)
Financial Resources
Loblaw maintains their financial focus on a strong balance sheet and believes that it is critical in order to reach
its potential.

Revenues grew 1.1%

Investments in IT business were lacking
Earnings per share dropped
Net assets of 12.2 billion
Adjusted debt of 4.4 billion
Locations

Retail Management MGMT3054-01

Utilized their cash flow from 2000 to 2003 for more location expansions and with more than 3.5 billion invested
in infrastructure (the equivalence of 6.4 million square feet) the companys revenue increased by 6%.

For 2004, Loblaw planned to renovate, expand or open 160 stores which was planned to cost 1.4 billion in

capital expenditures.
Currently, 9 years later,
Conveniently located.
Investing in all locations to implement new IT system.
Operations
Use a multi-format approach so they have the ability to maximize market share in the long-run that includes
planning for the future:

Utilize their cash flow and invest it.

Real estate is owned where it is possible to do so, maximizing flexibility for product and giving them

opportunities for future business.

Focusing on not only the food that consumers are looking for but also their everyday needs.
Loblaw is constantly striving to improve their value proposition
Merchandise and Customer Loyalty
Customer loyalty is created and enhanced using price competitiveness through their own superior control label
program.

Product and service offerings = customer loyalty

Differentiated, value-added products and services
Breadth of selection of merchandise is extensive
Loblaw maintains an active product development program for support with its control label program.
Store Management

Over 136,000 full-time and part-time employees ensure its business strategy is being implemented daily in more than

1,000 corporate as well as franchised stores across Canada

Loblaw strives to be agile yet cost effective and mainly consumer focused.
Managing strategies are developed and maintained under three core themes:

SIMPLIFY Brief SWOT Analysis:

INNOVATE

GROW

Retail Management MGMT3054-01

Strengths

Weaknesses

Most profitable/largest food retailer

in Canada
Very high quality brand
Financial and general merchandise
products with brands such as Joe
Fresh, and Presidents Choice
Improved customer network score
by 300 points
Innovative management team
Many in store services such as PC
Banks at all locations,.
Net assets of $12.2 billion and
adjusted

Stores seem to be
underperforming
Too many store names
Decrease in operating profits
Net income decrease
Inventory level too high
People-intensive
Debt of $4.4 billion

Opportunities
Reset merchandise in 78 stores
Grew distribution centre and store
network-fully integrated systems
Becoming the low-price leaderdiscount segment growing.
Purchased prescription files from 106
Zellers stores, contributing to
prescription count growth
national point of sale system
100 new Mastercard applicants
14 million customers per week

Threats
$61 million fine for 700 people
being affected with job loss
Foreign investors
Competition may overrun
Loblaws to some extent in the
future

Retail Market Strategy

Target Market

Satisfying Market Needs

Suburban residents

Suburban residents
Families
Middle-class income
Budget conscious shoppers

Loblaw stores are located in low-density

suburban areas to provide easy availability for
shopping needs.

Retail Management MGMT3054-01

Families

Middle-class income

Budget conscious shoppers

Building Competitive Advantage

Presidents Choice Brand
Marketing Millennials

PC Plus Loyalty Program

Quality and Value

Product availability and variety are important

to fulfill family needs. These needs are met
and popular name brands such as Presidents
Choice are available which is popular with
family shopping.
Middle-class income individuals and families
look for quality combined with good value.
Loblaw provides a wide variety of both which
makes the store more attractive to shop in.
Budget conscious shoppers look for a good
product at a reasonable price. Cheaper name
-brands are available to provide these needs.
The implementation of a loyalty program,
which allows for future savings on products, is
attractive to budget conscious shoppers.

The Presidents Choice brand products meet or

exceed the quality of other national brands.
Millennials, people born primarily between the
1980s to 2000s, are a highly sought -after
consumer group for marketers. They are
digitally connected and will control a large
amount of buying power over the next 25
years. Gaining their loyalty and keeping their
sales in the future will keep the company
competitive against other retailers.
The PC Plus Loyalty Program allows
customers to earn points on their purchases and
use the points towards saving on future
purchases.
Combining the PC Plus Loyalty Program with
Shoppers Drug Mart Optimum Plan will allow
Loblaw to see the spending trends of its
customers and provide better product
availability.
Such products as Joe Fresh apparel, PC
Financial Services and PC mobile phones are
key differentiators for Loblaw and give them a
competitive advantage by providing high
quality products which are not available with
other grocery retailers.

Retail Management MGMT3054-01

Growth Strategies
Product availability

Provide customer service

Operating stores under one name

Information Technology

Strategic Opportunities

Evaluation of Strategic Opportunities

Opening stores in urban area

Loblaw has struggled with providing stock to

all its chains. Focus on keeping products
stocked for customers will increase loyalty
with the customer.
Increasing ethnic fare, customer point cards
and online shopping will increase customer
service.
Currently Loblaw owns Real Canadian
Superstore, Zehrs, Shoppers Drug Mart,
Provigo, No Frills and Atlantic Superstores.
Operating under one name will transfer
customer loyalty from one store to another,
increasing sales across board.
Investing in information technology allows the
company to keep up with the new target market
of urbanites that are very invested in
technology. This will allow the company to
provide more sophisticated and user friendly
for services online including store locations,
product availability and online shopping.
Better information technology allows Loblaw
to better track consumer spending which will
allow them to provide for their needs.
Have employees wear pink in support of cancer
patients to show empathy.
Open stores in urban areas. Eighty-one percent
of the population in Canada lives in urban areas
and to date Loblaw has focused on store in the
low-density suburban areas.
Combine Loblaw grocery stores with Shoppers
Drug Mart to provide one stop shopping.
Send financial relief to countries in need such
as the Philippines.

Opening Loblaw stores in urban areas will

increase the target market by including young
professionals who will not travel to the suburbs

Retail Management MGMT3054-01

Combine Loblaw and Shoppers Drug Mart

Sending relief to countries in need

Have employees wear pink to support breast

cancer patients

to shop
Combining Loblaw with Shoppers will allow
for the ease of one stop shopping.
Customers who are loyal to Shoppers but do
not normally shop at Loblaw will do groceries
at Loblaw for reasons of convenience.
Sending financial relief to companies such as
the Philippines will show empathy on the part
of the company.
This is attractive to customers, especially those
that are not able to make a monetary
contribution. This gesture will draw loyalty
from the customer.
Public awareness has reached a new height
with regards to breast cancer.
Wearing pink shows support for patients and
cancer survivors.
This will bring loyalty from people.

Objectives and Allocation of Resources

2012

IT system initiatives were met and planned efficiencies were realized.

Bigger fresh product assortment was available.
Developed and implemented comprehensive category reviews; for improved competitiveness, profitability and

relevance.
Consistent execution of initiatives to increase competitive position and customer proposition was successful.
Continued innovation of its control brand products including T&T Supermarket Inc.
Reset 78 stores to complement weekly food shop.
Renovated and refreshed 103 stores and opened 7 new stores thus increasing companys retail square footage to

51.5 million square feet.

Growth in P.C. Financial services; achieved one million new P.C. MasterCard applicants.
Opened 87 additional mobile shops.

2013
Integrate supply chain systems with IT system at distribution centers.
Roll out IT system to a number of corporate stores.
Utilize customer feedback scores to exceed customer expectations and improve in-store experience, including
competitive pricing.

Retail Management MGMT3054-01

Focus on customized assortment, dynamic displays and delivering competitive value and implementation of
strategic category reviews.
Complete the creating of REIT (Real Estate Investment Company) by the way of an IPO.

PROMOTION
- LOYALTY PROGRAMS; PC
POINTS AND COUPONS
- INSTORE PROMOTIONS
OF FINANCIAL SERVICES
- WEEKLY FLYERS
-TV AND RADIO
ADVERTISEMENT

-BIG SQUARE FOOT AGE

-EASY AACESS AND
PLENTY OF AVAIABLE
PARKING.
- CLOSE TO
RESIDENTIAL AND ON
MAIN BUS ROUTES

PLACE

LOBLAW
RETAIL
MIX
PRODUCT
-- COMPETITIVE
COMPETITIVE PRICING
PRICING
-- BULK
BULK SELLING
SELLING OF
OF PRODUCT
PRODUCT
BETTER
CONSUMER
PRICINg
BETTER CONSUMER PRICINg

PRICE

QUALITY FRESH FOOD

-- QUALITY
FRESH
FOOD
VARIETY OF
OF CHOICE;
CHOICE; SIZE,
SIZE, COLOR
COLOR
-- VARIETY
IN MERCHANDISE
MERCHANDISE
IN
GLUTEN - FREE
-- GLUTEN
FREE
400 PC
PC BLUE
BLUE MENUE
MENUE ITEMS
ITEMS
-- 400
-ETHNIC FOOD MIX
MIX
-ETHNIC
FOOD
FINANCIAL SERVICES
SERVICES
FINANCIAL
THE MOBILE
MOBILE SHOP
SHOP
-- THE

Retail Management MGMT3054-01