Target set to steal significant share from Canadian retailers: study

Target not only has widespread recognition among Canadians, it appears poised to steal significant share from incumbents in a variety of retail sectors–including grocery–says a new study.

Kantar Retail, in partnership with TNS Canada, asked more than 1,000 Canadians about where they shop for groceries and health and beauty aids, as well as general merchandise and apparel. Respondents were also queried about their interest in shopping for these items at Target.

The study found that three quarters of Canadians are aware of Target Canada, while 43 per cent indicated that they are “likely” to shop for grocery, health and beauty aids at the retail giant. In addition, half of respondents said they are likely to shop for general merchandise or apparel.

The Kantar Retail study found that the Real Canadian Superstore and Costco are most vulnerable to Target in the grocery and health and beauty aids category, with more than half of their customers indicating they were likely to shop at Target Canada for such items. Walmart Canada was also deemed highly vulnerable, while Shoppers Drug Mart was “quite insulated,” said the study.

The Loblaw-owned Real Canadian Superstore also appears vulnerable to Target in both the general merchandise and apparel categories, as do its sister store Joe Fresh and The Bay. About 70 per cent of their shoppers stated an interest in shopping at Target Canada for the items.

By comparison, 63 per cent of Costco shoppers, 59 per cent of Walmart Canada shoppers and 56 per cent of Canadian Tire/Mark’s shoppers indicated an interest in shopping for these items at Target Canada.

Robin Sherk, a senior analyst with Kantar Retail in Cambridge, Mass., and primary author of the study, said that because Target has only recently begun local marketing efforts, consumer awareness–and interest in its offer–will increase as its 2013 debut draws closer.

Earlier this year, Target launched a one-day pop-up store in Toronto that featured an exclusive collection created by designer Jason Wu. The products sold out in less than five hours.

Canada is the Minneapolis-based company’s first expansion outside the U.S., where its retail segment racked up sales of US$68.5 billion in fiscal 2011, a 4.1% increase over the previous year.

The enthusiasm shown for Target by Canadian consumers is “encouraging” news for Target’s suppliers, said Sherk. It reinforces their expectations that the store will be a strong draw for Canadian shoppers when the first of its estimated 125-135 Canadian stores open for business in spring 2013.

Target has been largely quiet about supplier partners, although it did announce a partnership with independent mobile phone retailer Glentel earlier this month. In September of 2011, it announced a long-term partnership with Sobeys that will see the grocery retailer supplier its stores with frozen, dairy and dry grocery products, including both national and Target’s private label brands.

The study said that Target’s continued resonance with Canadian consumers will depend on two factors: Its ability to deliver on shoppers’ expectations and the response of its competitors.

Price and product assortment will be key determinants for its success, said the study, noting that a lack of leadership or availability could leave an eager shopper base “disaffected.”

Initial excitement about Target could also quickly dissipate if its private label offerings, particularly those in home and apparel, fail to meet customer expectations, said the study.