Blog: Canada probes Target expansion
Katy Askew | 10 April 2012
Target's plans to expand in Canada are to be examined by the Federal Government.
Target announced in January 2011 a deal to acquire the leases on up to 220 Zellers stores from Hudson's Bay Co. The firm has since purchased the leases of 189 sites currently operated by Zellers and indicated that it plans to open up to 150 stores in Canada, the majority of which are set to open in 2013.
According to Canadian reports, regulatory authorities have launched a review of this move under the Investment Canada Act. They will examine whether Target's plans to sell "cultural content" could reduce the amount of Canadian cultural content on store shelves - in the form of DVDs, CDs and books - and hurt domestic publishing houses.
While the review will not prevent Target's expansion, according to the Edmonton Journal the group could be required to increase the number of Canadian authors and musicians gracing its shelves, as well as purchasing imports through Canadian-owned publishing houses, among other measures.
The news is a reflection of the Canadian obsession with, well, being Canadian and differentiating itself culturally from its larger and more powerful neighbour. Nevertheless, any hurdle in the way of Target's expansion north of the boarder - and significantly any negative press surrounding it - will surely come as welcome news to the country's supermarkets.
Target's Canadian stores will have some significant differences from the company's US outlets. The average converted Zellers store will have about 100,000 sq ft of selling space, which is about one-third smaller than the average Target store in the US. And, while the company's focus on non-food means that it cannot be classed as a supermarket, it intends to compete for grocery dollars, stocking fresh and ambient food products at all outlets (compared to only carrying fresh at its Super Target and Pfresh in the US.)
With far fewer SKUs, Target's food range will not attempt to duplicate a supermarket. However, Target has taken aim at core-item sales it seems. In the firm's fresh aisles, consumers should expect a good range of basics (think every day fruit and veg, bakery items, dairy and popular meat products).
And, at least in the US, Target has a better reputation for quality in fresh than fellow compatriot Wal-Mart while also maintaining a value positioning - factors that are sure to make the retailer a formidable competitor.
So, what can Canadian supermarkets do to fend off Target's incursion on their turf?
Certainly, emphasising their wider range and food speciality is an obvious move. However, as this latest development shows, the virtue of being Canadian can also go a long way in Canada. Supermarkets should therefore look to highlight their local and regional sourcing credentials and emphasise any ties to the communities in which they are located.
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