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Target’s future cloudy in Canadian retailing

The reasons for Target’s precarious future in Canada could be found with Vern Miles and his packed shopping cart at Uptown’s busy Walmart on Wednesday. Miles thinks Walmart’s prices are better.
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Shoppers leave the Target store at Hillside Centre, one of five stores on Vancouver Island opened by the U.S. retail giant since 2013.

The reasons for Target’s precarious future in Canada could be found with Vern Miles and his packed shopping cart at Uptown’s busy Walmart on Wednesday.

Miles thinks Walmart’s prices are better. And as for Target, he simply said: “I’m not crazy about the stores.”

It’s hardly a secret that Target has struggled since opening 133 Canadian stores since spring 2013, including five on the Island and two of those in Greater Victoria. Shelves are sparse and competitors are either matching or offering better prices, which has led to dwindling customers after an initial curiosity rush. It also failed to live up to expectations that stores and prices would be similar to those in the U.S. where it is known for fashion-forward, low-cost clothing.

Minneapolis-based Target Corp. admits results in Canada have been disappointing and all eyes will be on the retailer’s fourth-quarter results next month. If Target continues to bleed money, some analysts say it will lead to store closures or even an exit from Canada.

Mark Colgate, associate dean and professor at the University of Victoria’s Gustavson School of Business, said Target might have launched itself too quickly across the country, adding there is no evidence Target has turned the corner.

“The stores have been mostly empty. Clearly they are struggling in terms of getting people inside the stores,” he said.

Even so, Colgate would be surprised to see the company pull the plug on all its outlets, saying he would be amazed if some of the stores were not doing well.

“I think the overall theme is that retailers have always found it tough to go from their domestic market into new markets. So you have to be very cautious,” Colgate said. “You have to test the market. You have to find out what works and doesn’t work.”

He said starting so many stores in such a short period is “flying in the face of history and that doesn’t make a lot of sense. They probably need to exit or they need to rewind and say: ‘Let’s take our best-performing stores, keep those and, if we are going to stay in Canada, expand slowly from there.’ ”

He said 20 to 30 successful stores would give the company a critical mass to stay in Canada and grow at a lower rate than earlier anticipated.

Setting up new distribution channel is always challenging when starting up in a new country. “If you can’t get a product on the shelves, then consumers aren’t going to walk through the door and that’s a huge issue for them.”

Competitors Walmart and Costco are doing well locally, where people can have one-stop shopping. It’s a complex task to set up in a new country, requiring good managers and an understanding of what is wanted in a local market, Colgate said.

Target brought in a new Canadian CEO last summer and the company is acknowledging its challenges. “We need to get through the fourth quarter and assess how the business progresses,” John Mulligan, Target Corp. chief financial officer, said in a November conference call with media. “From that point on [we will] assess where we are and what we think the long term is.”

Although there has been progress in Canada, “results remain unacceptable,” Mulligan said. “We need to see a step-change in performance there.”

On Wednesday, Eric Hausman, Target’s senior group manager for public relations, said in an email: “We’re focused on improving the business and providing a great shopping experience for our guests. We don’t have anything new to share.”

Target, however, has won over some shoppers. Julie Carruthers of Saanich was at Target twice on Wednesday, first at Hillside Centre for light bulbs, laundry detergent, dishwashing soap and hot chocolate mix. Later, she was in the Tillicum store for other items.

Carruthers visits the Hillside Target about twice a week. She used to shop at Zellers in that location and was sorry to see it go. “I like Target and I like its reputation,” she said.