But can the U.S. invader speak with Canada’s multi-ethnic consumers?
A new study suggests that incumbent retailers – Walmart in particular – will suffer significant customer defections when U.S. big box store Target makes its long-awaited foray into the Canadian market.
In a survey of 600 Canadian shoppers by Toronto-based management consulting firm Satov Consultants, 57% of Walmart shoppers indicated that they would shop at the store less frequently in favour of Target, while 41% of Sears shoppers and 37% of shoppers at The Bay indicated that they would make fewer trips. (19% of Canadian Tire and Shopper’s Drug Mart customers, and 16% of Costco customers, indicated that they would shop at those stores less frequently.)
Satov founder and president Mark Satov said that Walmart’s immense popularity is based largely on its rock-bottom prices, which is an area that Target – with its emphasis on so-called “cheap chic” products – can exploit.
“Walmart shoppers don’t love Walmart, they like what they get at Walmart, which is the ability to fill their basket cheaper and do one-stop shopping,” said Satov. While it’s unlikely that Canadian consumers will shift all of their shopping from Walmart to Target, Satov suggested that they might simply shift all of their shopping for a particular category, such as apparel.
“You’re going to see them trying Target, but if it can’t match [Walmart’s] price on all their important items, they’re not going to divert all of their trips there,” said Satov.
Satov said that Target’s arrival in Canada also poses some marketing challenges for the company and its recently appointed agencies, KBS+P Canada and Veritas Communications (with support from Northstar Research Partners and Boom Marketing).
While he doesn’t expect Target to abandon its U.S. positioning of “Expect more. Pay less” for the Canadian market, Satov said the company faces a “messaging challenge” in reaching all segments of the Canadian population.
“In the U.S. they’re dealing with Caucasians, Hispanics and African Americans. Culturally, they’re adjusting their messaging to Hispanics and sometimes African Americans depending on the area,” but the strategy remains more-or-less constant, he said.
“In Canada (where an estimated 22% of the population is foreign-born) you’re doing something in Quebec, something different in eight different areas of the GTA and something different in B.C. And it’s all different than what they’re doing in the U.S.”
The other marketing challenge, said Satov, stems from the fact that Canadians are not fully aware of Target’s brand proposition. “It really needs to educate the Canadian consumer that ‘We’re not just a big American discounter, we’re a place you’re going to come to have fun, a better shopping experience, considerably higher quality than Walmart, and find great stuff cheap’ ” said Satov.
Satov predicted that Target’s arrival would result in a flurry of marketing activity in the general retail category.
Target’s arrival may pose a challenge for Sears and The Bay in certain categories, said Satov, but is unlikely to have a significant negative impact on their operations.
