Retailers ramping up for Target's entry

Starting in March 2013, Target Corp. will roll out some 135 stores so incumbents are now preparing for the new player in the retail landscape through improved operations and e-commerce sites.

In a Globe and Mail report, Walmart Canada is speeding up the conversion of more of its Canadian outlets to Supercentres with full supermarkets, along with 40 new outlets (former Zellers stores) in 2012.

Meanwhile, Zellers will offer steep discounts as it prepared to close its outlets for Target or Walmart conversions, resulting in what experts say will be domino effect in price slashing in the sector.

Sears, Canadian Tire and Dollarama outlets are all being forced to defend their retail turf with the arrival of Target.

“They all have 2012 to prepare and get their house in order,” said Alex Arifuzzaman, partner in retail real estate specialist InterStratics Consultants said in the Globe and Mail report. “It’s really going to change the retail landscape.”

To make things even more unpredictable, consumer spending is expected to worsen as debt in Canada is at record level and the global economy continues to weaken.

Retail sales gains are only expected to rise between 2 and 3 per cent this year (same as 2011), while profit margins will be flat, predicts Darren Kirk a vice-president at Moody’s Investors Service.

Retailers like Sears have installed new executives (Sears Canada new CEO is an ex-Loblaw exec); while others like Dollarama are adding more stores or specialty product areas.

Drugstores being squeezed by new generic drug laws, will try to gain more customers to their pharmacies while Target temporarily closes the Zellers’ drugstore sections during lengthy renovations.

Katz is also focusing on stocking a broader array of merchandise than Target in areas such as vitamins, nutritional supplements, first aid and dental items, to compete.

Sobeys’ economies of scale are expected to improve with Target’s arrival as it will supply the retailer with groceries.

CIBC analyst Perry Caicco said in the article that Sobeys will most importantly gain knowledge on how Target operates, something the grocer did when it first supplied Walmart with groceries when it first arrived in Canada.