US retailer Target has announced its entry into Canada after acquiring leasehold interests in up to 220 Zellers sites from the Hudson’s Bay Company.

US retailer Target has announced its entry into Canada after acquiring leasehold interests in up to 220 Zellers sites from the Hudson’s Bay Company.

Beginning in 2013, Target plans to convert 100 to 150 of the stores throughout Canada.

Target is one of the strongest and most recognisable brands in the retail sector despite, up until now, only trading in the US. Canadian shoppers will welcome Target’s innovative merchandise, fun store environment and strong value proposition. In particular, Target’s own brands will go down a storm in Canada, where private labels play a more dominant role compared with the US.

Despite not operating physical stores outside the US, Target has done a great job of creating international buzz. Last year its collaboration with Liberty department store in London introduced British shoppers to the Target name. Similarly, the retailer has been successfully opening pop-up stores in Manhattan and other cities where it doesn’t have a physical presence for nearly a decade. This way Target can test demand and create brand awareness.

Canada makes perfect sense as a starting point. Tastes, culture, clothing sizes, not to mention proximity, are all contributing factors. Canadian consumers are also already very familiar with the Target brand. As for Zellers, the fit couldn’t get much better (even down to the use of Target’s red colouring and in-store signage).

Target isn’t alone in its quest to tap the Canadian market. At a time of sluggish growth at home, it’s no surprise Kohl’s, TJX-owned Marshalls, Victoria’s Secret parent company Limited and J Crew are all looking north of the border.

It will be interesting to see if Target brings its recently enhanced food assortment to Canada’s increasingly competitive grocery sector. Unlike the US, Canada is dominated by just four grocery chains, one of which is Walmart. Walmart Canada went from zero supercentres in 2005 to 119 today, increasingly stealing share from the country’s leading retailer Loblaw. The addition of food from Target would put additional pressure on Loblaw along with peers Sobeys and Metro. Pricing, particularly in Ontario, will have to be a major focus for Target to succeed.

In the longer term, expansion into Europe is probable and Target would likely do quite well in large cities in emerging markets where it can tap into the pockets of affluent consumers looking for Western brands. In the meantime, all eyes on Canada.

Natalie Berg, global research director, Planet Retail. For more information contact us on:

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