Target Canada 20130304

Target admits Canadian launch fell short of expectations

President Tony Fisher says the retailer needs to "redefine the perception of what a trip to Target means"

Executives at Target Corp. say they will spend next year trying to reshape the habits of Canadian shoppers who have soured to the company’s rollout north of the border.

The head of the Minneapolis, Minn.-based retailer told analysts on Wednesday that Target stores in Canada will play a key role in its growth over the next five years, conceding that not everything has gone according to plan.

“While initial sales in Canada have fallen well short of expectations, we remain very confident in the long-term potential of these assets,” chief executive Gregg Steinhafel said at an investor event in Toronto.

“These are great locations in strong markets with demographics that are ideal for our strategy.”

Target Canada president Tony Fisher said Canadians still haven’t fully embraced the “one-stop shopping” concept that’s so popular in the United States. Companies like Target have thrived in the U.S. on the idea that everything consumers need is under one roof, an image that competitor Walmart has also embraced with its superstore locations, which are relatively new in Canada.

Fisher hopes that next year, Target will convince Canadians to come to its stores on a regular basis as well.

“This requires us to redefine the perception of what a trip to Target means,” Fisher told analysts.

“Consumers are accustomed to visiting many different competitors to accomplish all of their shopping.”

Fisher said the company will focus on growing its share in sales of “frequency categories” like groceries, cosmetics and health products.

Target has already found particular sales success in Canada in both home and apparel, he added.

The acknowledgment that Target’s entry into Canada has been underwhelming is a stinging admittance by the company, especially since the discount chic chain generated such a high level of consumer anticipation and hype that’s rarely experienced in the retail industry.

Many Canadians who had travelled to the U.S. to shop at Target hoped that the retailer could recreate the spirit of its U.S. locations it acquired from Zellers.

Instead, various studies found that consumer perception of the Canadian stores was lacklustre, with complaints ranging from stores running out of some products while others considered the prices too high. Target defends its prices by saying that consumers save more when combining additional discounts applied to shoppers who pay using its credit card.

A survey in August by market research firm Forum Research found only 27% of those polled indicated they were “very satisfied” with their experience at Target.

That was below Target’s score in Forum’s April survey, when 32% of those polled indicated they were “very satisfied” with their experience at the discount retailer.

Analysts have also been critical of Target’s rollout in Canada. The company’s “impact has been extremely modest and consumer buzz has died down substantially since the first stores opened in early March,” said Irene Nattel, an analyst at RBC Dominion Securities Inc.

“We reiterate our view that over time, Target will become a more formidable presence in the Canadian market, but for the time being, impact has been minimal,” she said.

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