Loblaw Debuts Revamped Superstore Format in Ontario

JON SPRINGER

TORONTO — Leaner, cleaner and greener.

That's the idea behind the new Loblaw Superstore prototype that opened last week in Milton, Ontario. Featuring a new layout, environmentally friendly positioning and a new name — Loblaw dropped the “Real Canadian” phrase for this model only — the store represents the first attempt of Loblaw's new management team to revamp its food and general merchandise concept, which has struggled, particularly in Ontario.

Officials from Loblaw, which is based here, will watch results of the new store carefully, with the intention of rolling out similar stores beginning early in 2008, according to Irene Nattel, an analyst with RBC Capital Markets, Montreal, who toured the new store last week.

In a research note, Nattel praised the new store for improving upon the “shopability” and selection of previous models, but said it was too early to predict its success.

“One of the biggest surprises of the new Loblaw management team was its decision not to abandon the Superstore format but rather to fix it in the belief that a well-operated, successfully merchandised food/general merchandise box could be an important weapon in the war for share of the consumer wallet in Ontario,” Nattel wrote.

Changes in the Superstore prototype are designed to improve general merchandise performance and emphasize Loblaw's more aggressive pricing stance, Nattel noted. Loblaw touted the store's “consumer-centric” experience, offering reduced clutter, simplified price messages and signs, and “bag-free” shopping that the company said would reduce waste and promote sustainable alternatives.

The 120,000-square-foot store will not offer plastic grocery bags at checkout but instead will encourage customers to use reusable “green bags” or a proprietary “green box,” a reusable plastic tote that can hold the equivalent of three to five grocery bags and is designed to fit into the store's shopping carts. Loblaw said it mailed all Milton residents a free green bag and a coupon offering a free green box with a $25 purchase. Loblaw is offering all shoppers discounts on green boxes and green bags through Oct. 6.

Loblaw said the Milton store would be the first major grocery and general merchandise store in North America to go “bagless.” In April, Loblaw said it intended to reduce the number of plastic bags that wind up in Canadian landfills by 1 billion within one year.

Although successful in Western Canada, where it carries a reputation for price leadership in groceries, the Real Canadian Superstore was slow to catch on with consumers in Ontario and didn't work economically for Loblaw, Nattel noted. The new store is designed to enhance productivity and gross profit by reducing SKUs and inventory levels, and introducing new displays and procedures for stock replenishment to reduce labor costs and boost productivity.

“One of the striking changes is in back-of-the-house processes and procedure that have been significantly redesigned,” Nattel said, noting that the communication of the changes is done “largely using low-tech tools that are easy to understand.” Products, for instance, are color-coded and labeled by the area of the store, and shelves are arranged by aisle numbers.

Weak price perception at existing superstores is addressed in the new location using a horizontal “power aisle” in the grocery section and new endcap displays. Officials have also implemented a new process for price checking and matching on key-value items, according to Nattel.

Shopability and flow are improved by a less compartmentalized design using shorter aisles and fewer boundaries between shopping areas, Nattel said.