Does Target need Canada to survive?

1/14/2013

As Target readies to open the first of 124 stores outside of the U.S. starting in March, some are saying the retailer needs Canada to survive.

Headquartered in Minneapolis, the local paper reported that in the U.S., the retailer is running out of room to grow.

As well, south of the border, the recession has hit its customers hard and it is losing out to low-price competitors such as Amazon and Walmart.

Adding to Target's woes, usually its designer collaborations are sold out, but a recent one with Neiman Marcus failed to hit the bull's eye while key items were out of stock online during the crucial holiday period, said the report.

So it's no wonder that Target is looking north to fuel its future growth. Added to the appeal of Canada is the fact that Canadians are familiar with the brand and our economy has fared much better than that of its southern neighbours.

"If Target really wants to grow, they will need to expand outside of the United States," said Amy Koo of Kantar Retail, a consulting firm near Boston, in the report. "That will go a long way to stretch their customer base."

Target Canada president Tony Fisher told the Star Tribune that the retailer has always been focused on growing our core business profitably, "but we always knew at some point that international expansion was going to be a part of our history."

And the projected numbers for its Canadian division are promising with an annual revenue growth estimated at over 4.5 percent in 2013 and 2014. Compare that to the past five fiscal years in the U.S. where the retailer has only managed annual sales growth of 2.7 per cent.

There are challenges Target will inevitably face as it expands into Canada.

Firstly, Target will have to deal with widely differing in the various regions of Canada–from Quebec to the western provinces.

Bryan Berg, Target Canada's senior vice-president for stores, was responsible for Target's entry into Alaska and Hawaii. Berg will not only have to deal with logistics and information technology, but brand awareness. He told the Star Tribune that in Canada he has to establish a culture and a business in a market where Target didn't have a .

Fisher added that the retailer will have to learn how to translate its brand in a different language for the first time as it looks to enter the francophone province of Quebec.

There is also the question of how the retailer will manage its goods and supply chain within a country as vast in size as Canada.

But Target Canada seems to be up for the challenge, and said it expects to be profitable by the end of 2013.

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