Inside Logistics

Empire hones supply chain strategy

Accelerating plans for two e-commerce fulfillment centres and introducing Ocado's store pick solution


July 22, 2020
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STELLARTON, Nova Scotia – As part of a newly announced strategic plan Empire Company Limited will further enhance its e-commerce strategy on the Ocado platform.

The company’s new three-year strategy is intended to deliver an incremental $500 million in annualized profit by the end of fiscal 2023.

Empire is accelerating its plans for the remaining two e-commerce fulfillment centres – for a total of four across Canada – and introducing Ocado’s store pick solution.

This store pick solution will serve customers in areas where the CFCs will not deliver, or are not yet built, and will begin in Nova Scotia at the end of the summer, before expanding and moving West. Ocado’s store pick solution is live and successful in various cities across the world.

With four fulfillment centres, the company says it will cover approximately 75 percent of Canadian households, representing approximately 90 percent of Canadians’ spend. It launched it’s Voilà e-commerce app to customers in the Greater Toronto Area on June 22.

Empire’s second fulfillment centre is under construction in Montreal.  It is expected to begin delivering to customers in early 2022, delayed slightly due to the shutdown of non-essential construction in Quebec during the pandemic. The two DCs in Western Canada will now be built on an accelerated schedule.

At the end of the summer, Empire is planning to implement and test a Voilà store-pick solution, using Ocado technology, in Nova Scotia before expanding to hundreds of stores across the country over the next few years.

This solution suits areas where the density is not sufficient to warrant a full-size distribution centre and also for the markets where a CFC will eventually be built so customers will be able to use the  e-commerce service until central warehouse picking is available.

Online grocery penetration has grown dramatically as Canadians embraced e-commerce through the pandemic with online grocery penetration tripling from its pre-COVID level. This significant change warranted a shift in strategy to bring e-commerce to more Canadians faster than originally planned.

“As the retail landscape in Canada continues to react and shift under the seismic waves caused by the pandemic it is clear now, more than ever, that we must be able to serve customers where, when and how they want to shop,” said Michael Medline, president and CEO of Empire.

“We will invest in our core store business to drive growth and will move much faster with Voilà customer fulfillment centres and a new, exciting store pick solution, using Ocado technology.”

Empire delayed the launch of its new strategy, originally planned for release in May, as it dealt with Covid-19 pandemic lockdowns.

The benefits of the planned changes are expected to ramp up over the three-year period with the largest benefits reflected in year three. In the first year, benefits are expected to be skewed towards continued cost and margin improvements, with greater sales and market share improvements in the last two years.

Improvements related to scaling up the e-commerce business are more heavily weighted in years two and three. Benefits from renovations and other re-investment in the store network are expected to contribute to earnings throughout the next three years. Overall, a large portion of the benefits are expected to be achieved through initiatives related to store productivity, private label, store renovations, and new stores.

Capital spending to achieve these objectives is expected to average approximately $700 million annually over the next three years. The company will  invest approximately 15 percent of its estimated spend on advanced analytics technology and other technology systems. The total investment in e-commerce for fiscal 2021, including its share of the investment in the Montreal CFC, is approximately $65 million.