Target not a big threat to Canadian grocers, study finds

7/18/2011

When it arrives in Canada, Target will take business away from many retailers. But grocers may escape the worst of the American department store chain's onslaught.

According to a new consumer survey, less than one in five Canadian consumers plans to start buying more of their food at Target and less at their favourite supermarket.

The survey, by Toronto-based Satov Consultants, asked consumers who frequently shop at certain retailers whether they would switch to Target.

In grocery, 15% of Metro, Loblaws and Costco shoppers said they would switch.

The number was 16% for Safeway, 17% for Sobeys and 20% for Real Canadian Superstore.

Mark Satov, president of Satov Consultants, suggests that the nature of grocery shopping may be the reason consumers say they will continue shopping mainly at their favourite supermarkets.

“Grocery shopping is more of a habit than, say, shopping for clothes. It’s a high-frequency shopping category. And if you’re comfortable with your store, and know where they keep everything, there is a level of anxiety in going to another store,” he said.

But Satov also noted that just 44% of the people he surveyed were aware that Target sells groceries.

That suggests it may be difficult to gauge Target's real impact on grocery until after it actually starts operating in Canada and consumers get more accustomed to its breadth of food offerings.

Overall, Satov’s study found that Walmart could be hurt most by Target's arrival. Fifty-seven per cent of customers who frequently shop Walmart say they would be willing to change to Target.

Satov said it doesn’t mean that these customers will abandon Walmart. But they are willing to go to Target for items they now purchase at Walmart.

Target signed a deal earlier this year to take over up to 220 Zellers locations from the Hudson’s Bay Co for more than $1.8 billion. The U.S. discount department store retailer, known primarily for its chic and cheap clothing and home decor items, expect to open stores here by 2013.

Though Target has already said it will sell food at its Canadian outlets, it remains to be seen how much of its stores will be devoted to groceries.

Target does have a full grocery format in the United States called SuperTarget that is similar to Walmart’s Superstore concept.

But lately Target has been adding a new limited fresh selection format to its stores in the U.S. called P-Fresh (pictured above).

P-Fresh offers a smaller fresh department, plus a large number of aisles devoted to frozen and dry groceries.

Satov noted that Target would offer Canadian grocery shoppers something new with its private label lines. In food, that includes its low-end Market Pantry line. In the premium end, Target has a brand called Archer Foods. Target’s line of hair and beauty products is called Up & Up.

One big issue for Target when it arrives here will be price. Many Canadians who shop at Target south of the border are accustomed to its low American pricing.

For instance, Olay Regenerist skincare sells for $18.99 at a Target store in Buffalo but retails for $27.99 at a Real Canadian Superstore and $30.99 at Shoppers Drug Mart.

Satov’s study found that 49% of Canadians believe that Target will bring lower prices to the Canadian market. That means expectations will be high for Target to deliver not just chic products, but also cheap ones as well.

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