Canadian Retail on Target

target-logoWhy did Target fail?

Certainly there are, and will be, much smarter opinions on this subject. They will give you all of the business reasons, but I wanted to weigh in with a consumer’s perspective.

Personally, I really like the Target store that opened in our community. The staff are very friendly and the prices on the items we purchase are very competitive. Are there empty shelves? Yes. That, I believe, is the number one reason people didn’t embrace Target. Lack of inventory is a killer – people don’t want to make trips to multiple stores when they expect that the items they need should be in stock.

But, interestingly, I believe that it isn’t low prices that Canadians crave at this moment. Target couldn’t compete with Walmart, which together with Superstore/Loblaw and Costco, have a stranglehold on low cost goods. I don’t believe there is room in the marketplace for another discount retailer. Certainly, Zellers, which occupied the spaces before Target came to Canada, was also struggling. As did Kmart and Woolco before that. This tells me that people have their favourite stores if price is the primary consideration.

I believe there is, however, an unmet appetite for luxury goods and higher priced items. Until Nordstrom arrived in Canada, there was only one retailer selling designer fashion: Holt Renfrew. The gulf between high end and low end items is big enough to drive a truck through. The Canadian market is ripe for not only Nordstrom and Nordstrom Rack, but for the impending openings of Saks and Saks Off Fifth. I can’t wait.

Here’s why:

Most Canadians looking for designer or better quality merchandise do their shopping in the U.S. This means dealing with the exchange rate and, if you’re over your exemption limit, duty. There is only one Canadian option – Holt Renfrew – but its offerings are considerably smaller than U.S. retailers such as Saks, Bergdorf Goodman, Nieman Marcus or Nordstrom.

Canada’s economy is doing considerably better than the U.S., even with this current dip in oil prices.

There is a growing awareness in Canada of designer labels and the cachet that accompanies a Burberry handbag or Hermes scarf. For Canadians who don’t travel, there is little access to these labels in bricks-and-mortar stores. Even though online shopping has opened the door to luxury goods, many shoppers would prefer to see, touch and try on expensive clothing before purchasing it – no matter how good the online shopping return policy is.

Canada’s population is small. In fact, California has more residents than does all of Canada. How many discount retailers can we support? The segment of the population looking for discount merchandise is already well served.

I really hope that U.S. retailers don’t think they can’t survive in Canada. Ask Walmart, Home Depot, Lowe’s and others… they’ll tell you it’s not only possible but profitable. You just need to really understand the markets you enter and the unique selling proposition your stores offer.

Simple, right?

[NOTE: These are my opinions and I would welcome others! Please comment and let’s talk about it]

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