Tar-zhey, Eh?

Canada’s strong economy and low unemployment rate has made Canada an attractive destination for American retailers. Most significantly, the US discount retailer Target, which is often referred to as Tar-zhey, announced its acquisition of Zellers Inc, a subsidiary of the Hudson’s Bay Company for $1.825 billion.  They have purchased the leaseholds of 220 Zellers locations across Canada and have plans to convert up to 150 of them into Target in 2013.

Is there room in the Canadian discount retail market for a new major player, or will they have the same fate as K-Mart’s Canadian division? In my opinion, Target’s unique retail value proposition (RVP) will allow them to differentiate themselves from their arch-rival Wal-Mart, by providing a unique shopping experience and a wide selection of high quality goods at low prices. Target President and CEO Gregg Steinhafel says that their Canadian strategy will be the same as their American one “Expect More, Pay Less”, which has proved to be very successful and difficult to replicate.

One of Target’s most differentiating RVP in the U.S. is the experience that it offers.  They are clean, bright, organized and have a policy of referring to their customers as “guests.” Target plans to invest $1 billion in Canada to renovate the Zellers locations and create a similar “WOW” factor, says Steinhafel.

Target’s second differentiating RVP is the selection that it offers. Target revolutionized the American discount retail market in 1987 when it proved that high-end designers can be successful by selling their goods at discount prices.  Target has partnered with designers to create exclusive designer lines making “cheap chique.” These cool and trendy products are their differentiating factor in its competition with Wal-Mart and other discount retailers.

The challenge that Target Canada will have is to maintain the same low prices that their American stores have, which I believe is unlikely. It is easy to see online that most Canadian retailers have higher prices for the same product, even though the Canadian dollar is almost at par with the American dollar.

American Target stores have become wildly successful and a pop culture phenomenon with a cult-like following. Will Canadian consumers embrace the new retailer the same as our American neighbours have? I believe the market is right for a new up-scale discount retailer and that Canadians will respond with the same open hearts and open wallets. 

CNBC Documentary “Target: Inside the Bullseye” 

Target Press Release

Target Boss Outlines Canadian Vision