Starting in March, Target will begin its first efforts at global expansion outside of the United States by opening the first of 124 stores in Canada.  In the U.S. Target is running out of room to expand and is continuously faced with intense competition from Walmart and Amazon.  The expansion into Canada is one of the biggest initiatives for Target in its 50 year history, and is Target’s launching point as a competitive global player.  In 2011, Target spent almost $2 billion to obtain the leases of Canadian merchandiser Zellers to acquire access to profitable Canadian retail locations.

Target is a major player in the U.S. retail landscape because of its clever marketing, distinctive product assortments, and exclusive partnerships with prominent designers.  However, some of the luster of Target’s clever campaigns is starting to wear off as customers have grown weary of stock outs and shortages of merchandise.  Furthermore, in the past five years, Target has only averaged annual sales growth of 2.7%.   In order to drive growth, Target needs Canada.  Canada has weathered the financial crises better than most countries and is a tremendous opportunity of growth for Target.

Canadian consumers respond favorably to the Target brand and are familiar with its offerings.  Almost 30,000 Canadians carry the Target REDCard.  However, Canadian consumers’ tastes differ within the country.  Consumers in eastern provinces are more price sensitive than the oil rich western provinces.  Many Canadian consumers are leery of the American style of big-box retailers, preferring smaller, less overwhelming formats. Distribution also poses a challenge for Target’s expansion to Canada as the country is almost 4 million square miles.  Target has a competitive advantage in the U.S. because of its precision in moving goods from suppliers to distribution centers to stores.  Furthermore, some provinces in Canada conduct operations in French, while some in English.  This means that Target will have to provide the appropriate product assortments in both languages.

Discussion Questions:

1. Why is Target opening stores in Canada?

2. What adjustments will Target be making to its U.S.-type operation to its new Canadian stores?

 

SOURCE: Thomas Lee, Minneapolis/St. Paul Star Tribune, January 13, 2013