Who's afraid of Amazon? Not this Canadian food retailer

An Ottawa-based grocery chain believes the moment has come for its long-standing formula of fresh, local and prepared products, and it's launched into major markets, going head-to-head with the industry's giants.

If nothing else, Farm Boy is showing nerve and daring as it expands in a sector that is itself bracing for Amazon's entry into the market.

"We see weakness," Farm Boy chief executive Jeff York says of major players in Canada's grocery industry. "We want to pounce on it. It's a good time to grow the business."

Farm Boy has 26 stores around Ontario, and is currently in the midst of a big expansion. The chain doesn't sell dry goods such as detergent or toothpaste aisles are stocked with locally sourced produce and specialty food items.

On the opening day of its first new new location in Toronto, staff stand ready at an imported pizza oven, a panini-maker, a fresh sushi counter and a stir-fry station, eager to prepare custom takeaway meals for shoppers. A vast self-serve salad bar stretches past vats of soup made in the Farm Boy commissary.

"All made from scratch, delivered daily to the stores," boasts York while touring CBC News through the new Etobicoke store. He points out one of many examples of the Farm Boy house brand. "The best salsa you're ever going to have, made fresh every day."

Riding a good wave

He's happy to explain why the company intends to open 15 to 30 new stores in around Toronto over the coming five years, before looking to open in other provinces.

"I think food is very important to people now," York says. "It's just not go get cheap food and use it as a means of existence. Food is actually very popular, you see the TV networks, the whole chef culture. I think we are riding a good wave right now."

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But he admits there is one trend where Farm Boy hasn't focused much attention: e-commerce. Surprisingly, he says it's not a priority.

"Right now, two per cent of all food is done online. And really smart people are saying it's going to grow to 12 per cent in the next five years. That means 88 per cent of the businesses is not online."

His approach flies in the face of conventional wisdom in the grocery business right now. Most retailers are making announcements about adding e-commerce options:

• Loblaw has partnered with Instacart of San Francisco, to offer customers in Vancouver and Toronto the ability to order a grocery delivery online.
• Sobeys has licensed an e-commerce platform from British firm Ocado, to launch later this year.
• Metro intends to expand its click-and-collect program from Quebec to Ontario.
• Walmart is partnering with a Vancouver organics delivery company to launch online groceries there this summer.
• Costco has confirmed it too is exploring an online grocery service in Canada, after seeing success with a similar program in the US.

Farm Boy's CEO isn't fussed. "Online really only works in Toronto and Vancouver, because they're the only places with population density," says York. "I think a lot of our competition are totally fixated on the two to 12 per cent [of food bought online], and we're concentrating on the 88 per cent. That's why I sleep well at night."

'Incredibly dangerous' strategy

In Toronto, retail consultant Bruce Winder isn't convinced Farm Boy is taking the right approach, especially considering the way that customers of the future millennials have embraced e-commerce.

"To not have a service that they want and they're used to for other products? It's incredibly dangerous," he warns. "You're really handing that part of the business, the millennial customer, to someone else."

As for York's contention of "weakness" among the bigger players in the industry, Winder is likewise skeptical.

"I wouldn't underestimate Loblaw. They might be big, but they've shown in the past that elephants can dance, and that they can do some very interesting things that are quite progressive in terms of trends."

When CBC News asked a number of shoppers at Farm Boy's recent opening in Toronto if they ever buy groceries online, few replied yes. Many say they like to touch and see products before they buy.

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"I buy a lot of things that are not food online, but when it comes to food, not so much," said Reese Weber Owens, adding that she's not a fan of so-called "click and collect" either.

"I know a lot of retailers have the concept that you shop for your groceries online and then you go there to pick it up. That's not of value to me. If I have to go there, I may as well go into the store."

Retiree Terry Nichol and his wife Margaret aren't at all interested in online shopping. "We're not too good about the computer," he says with a laugh.

Everybody is competition

Still, there's no doubt retail is undergoing an e-commerce revolution. Amazon says its 2017 sales were up 31 per cent from the previous year, and is projecting similar growth of 2018. And the company's innovative approach will likely influence consumer behaviour over time.

Drone delivery is in development, and Amazon has opened an experimental store in Seattle that has no cashiers a smartphone app and sensors keep track of the products shoppers choose, so they can leave the store without stopping at a checkout.

Bruce Winder believes Canadians will eventually see many of the same Amazon services as the company offers south of the border.

"When Amazon starts to roll out their Amazon Fresh in some cities in the U.S., they're offering same-day delivery, or one- to two-hour delivery on fresh foods that's going to be a game-changer when it hits."

At Farm Boy Jeff York sees plenty of competition and not just from Amazon. "Everyone is competition, because we're in the restaurant business, we're in the produce business, we're in the meat business. Everybody is competition now, because of the internet."

But he says he's confident consumers will flock to Farm Boy's food-focused niche. And he has no intention of stocking non-food items such as shampoo and toilet paper.

"No, you can buy that at Walmart or Loblaws or Amazon." He chuckles. "Get it delivered by a drone if you want."