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TORONTO — Target Corp.’s impending entry into the Canadian retail market stands to challenge current shopper loyalties, possibly including pharmacy.
According to a study released Friday by management consulting firm SATOV Consultants, Canadians plan to alter their shopping habits to visit Target. The Minneapolis-based discount chain is slated to open its first stores in Canada starting in 2013 in the wake of its deal earlier this year to buy sites of discounter Zellers Inc.
The study found that 57% of Walmart shoppers indicated they will shop less frequently in favor of Target stores. Also, customers of The Bay and Sears showed a willingness to shift trips in favor of Target at a rate of 37% and 41%, respectively.
SATOV noted that although most retailers in Canada are likely to see a traffic decrease with Target’s arrival, some appear more resilient than others. The study showed that Shoppers Drug Mart, Canadian Tire and Costco have the most loyal customers among mass retailers. Only 19% of Shoppers Drug Mart and Canadian Tire customers and 16% of Costco customers indicated they were planning to become less frequent shoppers in favor of Target.
"Target’s biggest challenge in entering the Canadian market will be to differentiate itself from Walmart by demonstrating its unique value proposition, which values shopping experience and quality over rock-bottom pricing," Mark Satov, president and founder of SATOV Consultants, said in a statement.
The consultancy also pointed out that even though Canadians are well-aware of many of Target’s product offerings — with 92% indicating awareness of Target’s apparel products — most shoppers aren’t aware of all of Target’s offerings. In particular, the study found, less than half of Canadians (44%) are aware that Target offers pharmacy services, a service that the retail giant has hinted at providing in the Canadian market.
According to the study, Canadians are seeking more variety in men’s, women’s and children’s apparel, especially in the "cheap chic" category, which is the focus of Target’s product offerings.
"Canadians’ overall willingness to shift trips from current retailers is a significant market indicator, but it’s important to note there are more factors involved in the market dynamics. Many aspects of Target’s arrival are still unknown, such as the format stores will take given the smaller size of Zellers’ current locations and how that will affect the product offering," Satov explained.
"For current retailers, location overlap will be a strong predictor of loss of trips, in addition to the attitudes displayed in the study," he added. "When location and product overlap are considered, there are more retailers, such as Canadian Tire, that should be concerned about loss of market share."
Under its more than $1.8 billion deal with Hudson’s Bay Co., Target acquired leasehold interests in up to 220 sites operated by Zellers. Plans call for Zellers to sublease those sites from Target and continue to operate them under the Zellers banner for a period of time.
Target has said it expects to open 100 to 150 Target stores throughout Canada in 2013 and 2014. Zellers overall has 279 stores across Canada and most have pharmacies except in Quebec, where only a handful of locations include a pharmacy department.
