Empire (EMP-A.TO) is reducing its investments in its online shopping platform Voilà, as revealed in a recent announcement.
Empire, the company behind Sobeys, Safeway, FreshCo, and Farm Boy, is rethinking its approach to online grocery shopping with Voilà. Recently, they've decided to hit a pause on opening a new fulfillment centre in Vancouver and cut ties with their tech partner Ocado. This move comes as Empire faces challenges in making its e-commerce business profitable.
CEO Michael Medline explained that despite Voilà's growth, the Canadian market for online grocery shopping is smaller than anticipated. This has led to more losses than expected, overshadowing the success of their physical stores. To address this, Empire is making immediate changes to improve its financial performance.
The decision to halt the Vancouver centre, despite construction being nearly complete, reflects Empire's strategy to protect profitability while expanding. They had planned a phased rollout of fulfillment centres across Canada, but financial realities have forced them to reassess.
Ending the exclusive partnership with Ocado means Empire will incur a significant one-time charge. This move affected Ocado's stock negatively but caused Empire's shares to rise, indicating investor confidence in their strategic adjustments.
Voilà, launched in 2020, offers groceries delivered from automated centres dedicated to online orders. While sales have increased, they haven't met initial expectations. Medline pointed out that online grocery shopping only accounts for four percent of the market in Canada. He suggested that reaching six to seven percent could lead to profitability, highlighting the potential for Voilà's success in the future.
Despite challenges, Medline emphasized that customers love Voilà and believe it's Canada's top grocery e-commerce solution. He expressed confidence that with more customers trying it, profitability could be achieved in the medium to long term.
Empire's overall sales remained steady at $7.4 billion in the last quarter, but profits declined compared to the previous year. This underscores the importance of balancing their online and physical retail strategies moving forward.
In summary, Empire's adjustments with Voilà reflect a strategic shift to navigate the complexities of online grocery retail in Canada. By focusing on existing fulfillment centres and reassessing partnerships, they aim to strengthen their position in both online and brick-and-mortar markets. As they continue to adapt, the future of Voilà and Empire's e-commerce ambitions remains a key focus for investors and consumers alike.
