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Published January 17, 2024

Loblaw’s reduced discounts match competitors while retaining higher margin

Metro has been marking its nearly expired food items with up to 30 per cent off for over two decades
Loblaw’s reduced discounts match competitors while retaining higher margin

Ritika Dubey, The Canadian Press

Loblaw’s decision to reduce steep discounts on soon−to−expire food is a move to match its competitors as the demand for marked down groceries rises, experts say.

Until recently, Loblaw Cos. Ltd. — which owns grocery brands including Loblaws, No Frills, Zehrs and Valu−Mart — offered last−day discounts of up to 50 per cent on items nearing expiry.

The grocer said Monday it now offers 30 per cent off on last−day sale items across the board to be more predictable and consistent, spokeswoman Catherine Thomas said in a statement Monday. Loblaw previously offered between 30 and 50 per cent on last−day sale items, she said.

Lisa Hutcheson, a retail analyst at J.C. Williams Group, said in an interview Tuesday that the shift in discounts is in line with competitors that typically offer a 30−to−50 per cent window on items nearing expiry.

Competitors including Metro Inc. have been offering discounts in the 30 per cent range for a long time.

Metro spokeswoman Stephanie Bonk said the grocer has been marking its nearly expired food items with up to 30 per cent off for over two decades — "a long−standing practice."

Price reductions depend on several factors, such as the quality of the product and proximity to the expiration date, she said in an email. Besides, the grocer has partnered with food recovery and rescue services such as Too Good To Go and One More Bite.

Markdowns in grocery stores are more acute than other retail businesses due to short shelf life, Hutcheson said. In turn, grocers are extremely mindful of expiration dates on their items — especially for produce, bakery, deli and dairy.

In Loblaw’s case, she added, the grocer is minimizing margin erosion by offering less than 50 per cent and likely moving up.

Michelle Wasylyshen of the Retail Council of Canada said grocers have welcomed more and more Canadians to their discount stores and increased offerings of private−label food items. She added the grocers are also relying on other factors such as clearance prices and projecting inventory based on sales to reduce sales.

Demand for discounted food items has gone up, giving more wiggle room to grocers to sell items at a lowered discount rate, Hutcheson said.

"What drives markdowns for retailers is whether it’s selling or not selling," she said. If an item is selling quickly at 50 per cent markdown, it likely would sell at 30 per cent off, Hutcheson added.

While there was always a customer base for discounted food items, finding deals on flyers or apps, demand for lowered groceries has gone up because of the financial pressures and high inflation — encouraging the grocer to reduce discounts.

"Any discount is a benefit for the customer and so will the customer shop it anyway for the price," Hutcheson said.

Although, she noted that Loblaw’s discount strategy is "unusual" at this time of the year.

"January is a month of bills and there are a lot of mortgage renewals (for Canadians), so it seems like not a great time to do this strategy," she said. The changes would be a shift for people who have come to rely on last−day discounts, Hutcheson added.

banner image: The Canadian Press

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