Walmart Canada Corp. has the most to lose when Target Corp. begins opening stores in Canada, according to the latest research on consumer loyalty.
But Canadian Tire Corp. might face a serious threat as well because of its stores’ proximity to current Zellers locations and its overlap with Target in key household categories, says Mark Satov, founder of the Toronto consulting firm Satov Consultants, which conducted the study.
Researchers asked people who identified themselves as frequent consumers at chain stores — including Walmart, Canadian Tire, Sears and The Bay — which retailers they would be less likely to shop at when Target arrives.
The Arkansas-based big-box chain topped the list, with 57% of customers saying they would be less likely to shop at Walmart. Sears Canada was next with 44%, followed by the Bay at 37%.
Canadian Tire was cited by only 19% of those surveyed, but Mr. Satov said its proximity to Zellers locations that might become Target outlets and its product mix mean Canadian Tire is likely facing a serious threat.
Six weeks ago, Target announced the first 105 proposed store leases that it was acquiring from Zellers.
Earlier this year it paid $1.8-billion to Zellers owner Richard Baker for up to 220 leasehold interests of Zellers locations. Two weeks ago, Walmart signed a deal to acquire leases at up to 39 sites now operated by Zellers from Target Canada.
“Walmart [faces] the biggest risk,” he said. “You know you need to shop there because they will have it at the cheapest price, but if there is another option consumers might take it.”
That Target has managed to achieve such brand resonance in Canada two years before opening and without any mass communication efforts is a remarkable feat, Mr. Satov said.
Mr. Satov said it is a clear sign that Canadians are primed to at least try the chain when it opens up to 150 stores in 2013. (Prior research by Toronto retail consultancy Kubas Primedia published in May bears that out, with 61% of consumers across the country saying they would be “very” or “somewhat” interested in shopping at Target stores when they open in Canada.)
But the potential market impact is not as clear-cut as a one-to-one consumer defection to Target from any particular retailer, according to Mr. Satov. It’s a question of how much of a potential bite Target will take from strong Canadian banners.
“You don’t lose shoppers, you lose trips,” he explained. “If your average non-food Walmart shopper shops there 12 times a year, 57% of those people would see some of those trips shift to Target. With a food shopper, [Walmart] becomes a part of their routine and [store visits] could range from 26 to 52 trips a year. The question is, how many [customer] trips will Walmart lose?”
Target’s status as a potential grocery player is uncertain in Canada and hinges, initially at least, on leasing restrictions in the malls where Zellers operates. Many of those malls are already anchored by another full grocery store, Mr. Satov noted.
A strong established base in food is an asset Canadian Tire does not have, however. “If I were Canadian Tire, I’d worry a whole lot more than the data would indicate. They have gone more into housewares, which is Target’s sweet spot, and the location overlap is rather high…. And if Target gives them a great experience I think they should worry about losing female customers. Target has apparel and housewares, and Canadian Tire does make a lot of money on housewares and cleaning products.”
Canadian Tire does not appear to be sitting by idly; the retailer just announced a vast expansion of its sporting goods category — one which Target carries only minimally — with the $770-million purchase of sporting goods chain Forzani Group Ltd.
As for Sears, the retailer caters to an older demographic and there is less geographic overlap with potential Target sites than with Canadian Tire and Walmart, Mr. Satov said.
While Walmart seems to have the most to lose, it’s unlikely the retailer will suffer significantly unless it changes its core brand positioning, Mr. Satov said. Whereas Target’s positioning is about offering stylish products for less than expected, Walmart is much more focused on offering the lowest prices available on many goods.
“The data is a warning sign, but it’s not the whole answer,” he said. For Walmart, Target and Canadian retailers who want to stay at the forefront of consumers’ minds, “a lot of the game is knowing who you are. I don’t think that if Walmart sticks to its guns its business is going to collapse in Canada.”
But Canadian Tire Corp. might face a serious threat as well because of its stores’ proximity to current Zellers locations and its overlap with Target in key household categories, says Mark Satov, founder of the Toronto consulting firm Satov Consultants, which conducted the study.
Researchers asked people who identified themselves as frequent consumers at chain stores — including Walmart, Canadian Tire, Sears and The Bay — which retailers they would be less likely to shop at when Target arrives.
The Arkansas-based big-box chain topped the list, with 57% of customers saying they would be less likely to shop at Walmart. Sears Canada was next with 44%, followed by the Bay at 37%.
Canadian Tire was cited by only 19% of those surveyed, but Mr. Satov said its proximity to Zellers locations that might become Target outlets and its product mix mean Canadian Tire is likely facing a serious threat.
Six weeks ago, Target announced the first 105 proposed store leases that it was acquiring from Zellers.
Earlier this year it paid $1.8-billion to Zellers owner Richard Baker for up to 220 leasehold interests of Zellers locations. Two weeks ago, Walmart signed a deal to acquire leases at up to 39 sites now operated by Zellers from Target Canada.
“Walmart [faces] the biggest risk,” he said. “You know you need to shop there because they will have it at the cheapest price, but if there is another option consumers might take it.”
That Target has managed to achieve such brand resonance in Canada two years before opening and without any mass communication efforts is a remarkable feat, Mr. Satov said.
Mr. Satov said it is a clear sign that Canadians are primed to at least try the chain when it opens up to 150 stores in 2013. (Prior research by Toronto retail consultancy Kubas Primedia published in May bears that out, with 61% of consumers across the country saying they would be “very” or “somewhat” interested in shopping at Target stores when they open in Canada.)
“You don’t lose shoppers, you lose trips,” he explained. “If your average non-food Walmart shopper shops there 12 times a year, 57% of those people would see some of those trips shift to Target. With a food shopper, [Walmart] becomes a part of their routine and [store visits] could range from 26 to 52 trips a year. The question is, how many [customer] trips will Walmart lose?”
Target’s status as a potential grocery player is uncertain in Canada and hinges, initially at least, on leasing restrictions in the malls where Zellers operates. Many of those malls are already anchored by another full grocery store, Mr. Satov noted.
A strong established base in food is an asset Canadian Tire does not have, however. “If I were Canadian Tire, I’d worry a whole lot more than the data would indicate. They have gone more into housewares, which is Target’s sweet spot, and the location overlap is rather high…. And if Target gives them a great experience I think they should worry about losing female customers. Target has apparel and housewares, and Canadian Tire does make a lot of money on housewares and cleaning products.”
Canadian Tire does not appear to be sitting by idly; the retailer just announced a vast expansion of its sporting goods category — one which Target carries only minimally — with the $770-million purchase of sporting goods chain Forzani Group Ltd.
As for Sears, the retailer caters to an older demographic and there is less geographic overlap with potential Target sites than with Canadian Tire and Walmart, Mr. Satov said.
While Walmart seems to have the most to lose, it’s unlikely the retailer will suffer significantly unless it changes its core brand positioning, Mr. Satov said. Whereas Target’s positioning is about offering stylish products for less than expected, Walmart is much more focused on offering the lowest prices available on many goods.
“The data is a warning sign, but it’s not the whole answer,” he said. For Walmart, Target and Canadian retailers who want to stay at the forefront of consumers’ minds, “a lot of the game is knowing who you are. I don’t think that if Walmart sticks to its guns its business is going to collapse in Canada.”
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