What is in this article?:
- Target Practice: Canadian food retailers brace for invasion of Target, Wal-Mart supercenters
- 'More Enthusiasm for Target Than Wal-Mart'
- 'Big 3' Can Compete on Price
- Freshco 'Freaked the Market Out'
- Sidebar: Questions Surround Sobeys-Target Alliance
"Because things are tight, almost any significant new entrant into the market, like Target, is simply going to ratchet things up a little higher. Everyone’s concerned about it.”
— Ed Strapagiel, retail consultant
Maybe there’s never a good time to face a massive influx of new supercenters, but it won’t stop retailers in Canada from asking, Did it have to be now?
The high-profile arrival of U.S. mass merchant Target Corp. to Canada next spring — along with an ongoing expansion effort from Wal-Mart that’s rapidly turning its store base into grocery-led supercenters — has coincided with a consumer mindset that could prove to be all too welcoming for the newcomers, sources said. This reflects a Canadian economy that after a quick recovery from the 2008 recession, has once again stagnated and resulted in a consumer that is especially focused on price and value. For supermarkets, sales have largely been flat, store traffic is down and baskets slightly up as shoppers remain cautious.
“Just about all Canadians today are concerned about the economy, so price is on every grocer’s mind,” George Condon, a former editor at Canadian Grocer magazine and an industry consultant, told SN. “It’s one of the overriding issues in the industry — keep your prices as low as you can.”
To this, Minneapolis-based Target will add at least 125 new stores, beginning next spring as it converts the Zellers stores it purchased, and Wal-Mart said it would double its supercenter rollout by way of store expansions and conversions of former Zellers passed along by Target. The Canadian version of the Bentonville, Ark.-based retailer plans 73 projects in 2012 alone — its busiest year since arriving in Canada by way of the Woolco purchase in 1994.
“Because Wal-Mart is expanding in the marketplace, and margins have been tight, a lot of operators have been doing projects with supply chain management and other things to be more efficient,” Ed Strapagiel, a retail consultant based in Toronto, told SN. “And because things are tight, almost any significant new entrant into the market, like Target, is simply going to ratchet things up a little higher. Everyone’s concerned about it.”
Read more: Target Begins Hiring for Canada Stores
It’s not all doom and gloom up North, however. Despite some local flare-ups, sources say competition has been rational — so far — and supermarkets are making progress improving efficiency and investing in their internal capabilities to be more competitive.
“If the consumer was in a better place, this wouldn’t matter too much. The size and pace of [the supercenter expansion] would be digestible,” one industry observer, who asked not to be identified, told SN. “But the problem is the Canadian consumer went into hunker-down mode when employment growth slowed, and unless we get the consumer going the economy is going to be a drag and Wal-Mart and Target’s growth is going to be more punitive than it would be normally.”
Assessing Target’s potential impact on the Canadian market has become something of a cottage industry for retail watchers in Canada. While no two studies are alike — Target’s most vulnerable new counterparts are either Costco, Sears Canada, Wal-Mart or Loblaw, depending on the particulars of the report — observers are united in the notion that Canadians are very much looking forward to the superstore.