Skip to main content

New study: Target won't hurt food retailers


New analysis of Target Corp.’s entry into Canada predicts the American discounter will impact department stores here the most, while fashion and home decor retailers will also get dented.

But grocery stores may not feel the heat at all.

That analysis, released over the weekend by retail consultancy KubasPrimedia, is based on consumer surveys.

Among the findings: only six per cent believe that food retailers will lose “a lot” of sales and 35 per cent think existing grocers in Canada won’t lose any sales.

By comparison, 20 per cent of consumers said they expect both Sears and Walmart in Canada to lose “a lot” of sales to Target and another 50 per cent feel the two will lose at least “some” sales.

“It appears that Canadian consumers want Target more for fashion than food,” KubasPrimedia concluded.

The Toronto company added that one reason Canadians may not be so keen to buy food at Target is that grocers here are doing a relatively good job serving them.

“Walmart opened its first Supercenter in Canada in 2006 and has been expanding ever since. All other Canadian supermarket chains have been working on improving their competitive performance ever since too,” KubasPrimedia stated.

Then again, some Canadians may not even consider Target a food retailer. A study done last summer by Satov Consultants in Toronto found that only 44 per cent of Canadians are aware that Target even sells food. And it remains unclear at this point how much food Target will have in its Canadian stores.

In the U.S., Target has sold a healthy smattering of dry and frozen goods in stores for years. Since the recession, the company has upped its selection of fresh foods by retrofitting existing department stores with a concept called P-Fresh that offers a limited assortment of produce, meats and dairy. It also has a full grocery format south of the border called SuperTarget that is not coming to Canada.

Whether P-Fresh gets introduced here eventually is up for debate. Though Target has a deal to be supplied with food by Sobeys, analysts have noted that Zellers stores are slightly smaller that Target’s standard American footprint, which means Target will have to edit its offering in Canada at all but newly built stores.

Many believe Target Canada will reduce its food selection long before it reduces choice on the chic but cheap fashions and home goods its famous for.

Target is certainly already well-known to Canadian cross-border shoppers. KubasPrimedia found that 43 per cent of Canadians have shopped at a Target in the U.S., and 17 per cent have done so in the last year.

With 61 per cent of Canadian consumers" very" or "somewhat" keen to going to a Target, “there are more Canadians interested in shopping at Target Canada than who have actually directly experienced a Target store south of the border. It appears that Target’s reputation precedes it,” KubasPrimedia concluded.

Fashion retailers that will be affected most by Target's arrival include department stores and women's and children's wear stores. Retailers with a more distinctive market position, such as the Gap and Winners, will hold up better.

The retailers hurt least by Target, at least according to the KubasPrimedia survey, are Costco and Ikea. These retailers have unique offerings–Ikea with a distinct shopping concept and merchandise; Costco with a membership program and a reputation for value–that Target can't easily duplicate, KubasPrimedia concluded.

KubasPrimedia's analysis is based on consumer surveys part of the company's annual Major Market Retail Report, which tracks retailers' competitive performance in Canada's six largest retail markets.

This ad will auto-close in 10 seconds