Target’s retail invasion of Canada seems to have developed parallels to Napoleon’s invasion of Russia – it is fighting a losing battle in a cold winter. Target’s northern front lost 941 million dollars in 2013. A CBC news story reports that:
“That expansion has been hammered by supply issues, as there are frequent reports of empty shelves here. And Canadians haven't been as eager to flock to buy Target goods that are at least perceived to be more expensive in Canada than they are in the U.S.”
Yet, Target expects its sales to double in Canada this year. They are going to have to work pretty hard at it I think because the Canadian retail environment has shifted over the last decade.
First, Canadians are not quite as accepting of the fact that they have to often pay significantly more for the same product in Canada relative to the United States. Moreover, they are not interested in waiting for Jim Flaherty to address the cross-border price gap. They simply cross the border into the United States and shop there. Barring a really big drop in the value of our dollar, that is going to continue.
Decades of cross border shopping have created a much more opportunistic and informed consumer, which when coupled with internet shopping means that Target cannot expect to compete in Canada by simply being a revitalized Zellers. Moreover, the supply issue is not just a case of empty shelves – many brand products that are for sale in the U.S. Targets are not for sale in Canada. Canadians will shop in the U.S. not just for lower prices but also for different products and brands. If Canadians in Canada have to get the same things at Target that they can already buy at Canadian Tire and Walmart and at the same price then there is little point.
Which brings us to the second point. The Canadian retail market is much more competitive than it was a decade ago. Walmart is already here and has established a secure presence that Target has to compete against. It may be that the Canadian market is too thin to support two aggressive low end to mid-market retailers – at least outside of the major urban areas of Vancouver, the Calgary-Edmonton corridor and the GTA/Montreal nexus. Walmart has also established a strong presence in groceries and in smaller cities where there is both a Walmart and a Real Canadian Superstore, I think that combination places Target at a distinct disadvantage.
It would be interesting to know what the differential performance of Target stores is between Canada’s major urban agglomerations and the smaller urban retail environments. My anecdotal evidence for out here in Thunder Bay - a definitely more compact Canadian retail environment - is that the Target is pretty deserted when compared to the Superstore or the Walmarts in town.