Did Target understand the Canadian market?

The retailer's problem was not just a lack of products, it was not using those products to differentiate itself, experts say.
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While consumers’ distaste for empty shelves and higher-than-expected prices may have been contributing factors to Target’s failed Canadian expansion, those are simply signs of a greater lack of understanding about the Canadian consumer and marketplace, according to industry experts.

Much has been made about Target’s empty shelves, and retail analyst Ed Strapagiel says waiting too long to address its merchandise issues because of the “ego” it had about its planned mix didn’t give Canadian shoppers a reason to come in.

“They think of themselves as really sharp operators and they have this almost religious reverence for their plans and merchandise mix,” he says. “Even though they had products, they had empty shelves because [the shelves] were meant for [different products] and the employees couldn’t put anything else on the empties, even if just to give the impression that they had merchandise.”

Had those shelves not only been filled, but filled with something different, Target may have had an easier time in Canada, according to Robert Levy, president of consumer insight company BrandSpark International. He says Target didn’t deliver on the brand promise the company built its pre-launch marketing campaign around, bringing something new and different to Canada. And while many consumers were disappointed that Target didn’t offer the same low prices here as in the U.S., Levy points to results from the recently released Canadian Shopper Study, which shows an increasing willingness for Canadians to pay more for products that offer that innovation and exclusivity.

That study, which surveyed 65,000 Canadians and 80,000 Americans, measured the brand perception of retailers. In the U.S., the number of regular Target shoppers who said they chose the retailer because it offered the lowest prices (9%), was only slightly higher than those who said the same in Canada (6%). Walmart, Target’s biggest competitor, actually provides more competition on prices in the U.S., where 65% of regular shoppers say they go there for the lowest prices, compared to 44% here in Canada.

In the U.S., Target is a draw because of its private-label offerings that are both exclusive to their stores and affordable, such as fashion by designer Isaac Mizrahi and home products by Michael Graves. While the company did attempt a private label fashion offering here through a partnership with Roots, Levy points out that partnering with a brand meant Target was still competing with other Roots stores and didn’t offer the same prestige as a big-name designer (Target did offer products from some North America-wide designer partnerships as well, but they didn’t result in the buzz of the U.S. ones).

These kinds of things aren’t unprecedented on the Canadian market: he points to designer partnerships boosting H&M’s “cheap chic” positioning, Canadian Tire’s exclusive Motomaster brand and Sobeys aligning itself with Jamie Oliver as examples of strong retail brands that have successfully cast a “halo” over the rest of the store.

Whereas a quarter of American Target shoppers went there to try new food and personal care products, only 14% of Canadians said the same factors were a draw. “There’s lots of brands that are doing well here that aren’t just focused on having the lowest price. There’s more to value than low prices,” he says. “The tagline in Canada was, ‘Expect more. Pay less,’ so they kind of set themselves up for failure. I don’t think they understood the Canadian consumer properly.” Effectively, Canadians were willing to pay more for products, had the brand delivered them as they do south of the border.

“Target is multi-billion dollar successful brand in the U.S., but it’s not based on having the same low prices as Walmart,” Levy says. “It’s because of having other differentiation with its products.”

Levy adds the competitive landscape in Canada is also very different than the U.S., with Target having to go up against Shoppers Drug Mart in personal care and food (which the survey shows has stronger brand strength here compared to what equivalents Walgreen’s and CVS have in the U.S.) and Joe Fresh, which has a similar brand positioning here to Target’s fashion offering south of the border.

“Target’s brand [for Canadians] at its height was based on the whole cache of the woman’s getaway of piling into the car with friends and seeing what you can get for your $20,” adds marketing consultant Tony Chapman. “There’s a lot of people playing the treasure hunt strategy well, like Winner’s and Marshall’s, but the reality is what they bought was Zellers, and your impression was there was no difference between this and Zellers, except Zellers had more products on the shelves.”

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