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Target Canada

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Target Canada Corp.
Company typeSubsidiary
IndustryDepartment store
PredecessorZellers
FoundedMarch 5, 2013 (2013-03-05) in Ontario, Canada
FateCurrently in liquidation process under the CCAA[1]
Headquarters
Mississauga, Ontario
,
Canada
Number of locations
133[1] (2015)
Key people
Mark Schindele (President)
Number of employees
17,600[1] (2015)
ParentTarget Corporation
WebsiteTarget.ca

Target Canada Co.[2] is the Canadian subsidiary of United States-based discount department store chain Target Corporation, formed in 2011 to oversee the company's Canadian operations. Target Canada's main rival in the discount store category is Walmart; while there is also competition with supermarket chains such as Loblaws, Metro, and Sobeys (despite having an agreement with Sobeys), and other retailers such as Sears Canada, Canadian Tire, Shoppers Drug Mart, and Rexall.[3]

In 2011, Target acquired the leaseholds of 189 locations operated by Hudson's Bay Company's (HBC) Zellers discount chain, with the intent to use 125 of these sites to open Target stores in 2013.[4][5]

Target opened its first Canadian stores in March 2013; its had 133 stores on October 22, 2014.[6] On January 15, 2015, Target announced that it will close all of its 133 Canadian stores.[7][8]

History

A Target store in Shoppers World Brampton in Ontario.
A Target Store in Hillcrest Mall in Richmond Hill, Ontario.
Target store at Scottsdale Centre in Delta, BC

2010: Consideration of Canadian operations

Regular rumours surfaced since at least 2004 that Target was interested in expanding into Canada by acquiring Zellers outright.[9] In January 2010, Target publicly indicated long-term plans to expand internationally, likely including Canada, but that those plans would not take effect until 2013 at the earliest.[10]

2011–2013: Leaseholds acquisition and partnership

On January 13, 2011, Target announced that it would purchase the lease agreements of up to 220 Zellers stores for C$1.825 billion.[11] Under the agreement, Zellers would initially sublease the properties, and continue to operate them as Zellers locations until at least January 2012 and at latest the end of March 2013.[2]

Target did not buy the Zellers chain outright, which was left with 64 stores in less desirable locations. HBC tried unsuccessfully to find a buyer for the remaining stores and initially planned to continue operating Zellers as a smaller chain. However the geographical constraints of serving these far-flung Zellers outlets meant that operating them was no longer economically viable, so HBC announced on July 26, 2012, that it would close almost all of these stores,[12][13][14][15][16]

In May 2011, Target revealed its first 105 selections and stated that the vast majority of those in this first group would be converted to Target outlets.[17] In September 2011, Target unveiled 84 additional selections, bringing the total number of Zellers leases acquired to 189 (instead of 220 as originally announced).[4] The first store opening cycle would be in March/April 2013, followed by four additional cycles later that year.[5] Zellers locations to be converted were typically closed for at least six to nine months for significant remodelling and renovation.[18] Target announced plans to hire 27,000 new employees to support its expansion into Canada,[19] including 5,000 in Quebec,[20] and that its food and grocery items in Canada would be supplied by Sobeys.[21]

After the Zellers stores at the selected locations closed, Target planned to renovate between 125 and 135 of them, and reopen them under the Target banner.[18] Target would sell the remaining 64 to 74 acquired locations to other retailers, including 39 already resold to Walmart Canada.[22]

Unlike Walmart's entry to Canada with the acquisition of the Woolco stores in 1994, Zellers employees were not retained by Target nor Walmart, and they had to re-apply for their position to continue working in their same locations.[23] Target Canada stated that former Zellers workers were guaranteed an interview though not a job, however the United Food and Commercial Workers of Canada complained that many Zellers employees were not hired including those with long years of service.[24]

Target confirmed the list of its locations in July 2012.[5] The chain finalized its 127 stores to open in 2013.[5] Of this total, 125 were converted former Zellers stores.[5] The other two locations in Niagara Falls and Centre Laval were sites previously occupied by Walmart stores.[5][25][26] The first Target stores in Canada were opened on March 5, 2013 in the Ontario communities of Guelph, Fergus, and Milton,[27] being close to one of Target Canada's three distribution centres.[28]

2013-2014: Since opening

On March 5, 2013, three Target stores in Milton, Fergus and Guelph, Ontario were opened to the public and operating as test stores, and a further 17 stores in Ontario opened on March 19, 2013. Four additional stores in Ontario were opened on March 28, 2013, followed by a number of openings in Western Canada in three provinces on May 6, 2013.[29][30] Target opened more stores in four provinces including cities in Regina and Saskatoon on July 16, 2013.[31] On September 6, 2013, Target Canada opened more stores between September 17 and October 18, including the provinces of Quebec and Nova Scotia.[32] On October 28, 2013, Target Canada opened 33 locations between November 13 and November 22, including in the provinces of New Brunswick, Prince Edward Island and Newfoundland and Labrador.[33] On March 14, 2014, Target opened three stores in the cities of Toronto, Edmonton and Victoria.[34] On August 1, 2014, Target opened three stores in the cities of Barrie, Mississauga and Candiac, Quebec.[35]

Target Canada includes smaller Starbucks stores in the majority of its locations.[36] A notable Canadian clothing brand, Roots, is being temporarily sold in Target Canada.[37]

Early results

Target Canada president Anthony S. "Tony" Fisher expected that some Canadian consumers would continue to cross the border and shop at Target stores in the United States. Fisher acknowledged that the Canadian stores would not have price parity with their U.S. counterparts, saying “Transportation costs are higher, distribution costs are higher, fuel costs are higher, wage rates vary across the country, the tax rates are different, cost of goods are different, the duties — I think the scale we have here in Canada is quite different from the incredibly different, densely populated U.S. marketplace.” Canadian packaging laws, protectionist tariffs on some foods and exclusive wholesale arrangements mean that Target's American distribution network could not service its Canadian stores.[38] In addition, Canadian Target stores did not have local authority to order their own merchandise; this resulted in the Windsor, Ontario stores stocking Toronto Maple Leafs and Toronto Blue Jays apparel, instead of that of the Detroit Red Wings and Detroit Tigers, which were more popular in Windsor, given its proximity to Detroit, located across the Detroit River from Windsor. Supply chain problems meant that Target Canada stores often had empty shelves for three weeks.[39][40]

Target Corporation's expansion into Canada hoped to capitalize on Canadian shoppers who frequently crossed the border for its U.S. stores, however this may have backfired as Canadian shoppers felt that Target Canada stores failed to meet the high expectations set by their U.S. counterparts. Target Canada enjoyed a strong opening, but subsequent results had been disappointing, dragging down its parent company's second quarter results. Despite the initial high traffic at Target's new stores, customers were not returning frequently enough to these stores to buy the basic household items, as that market was dominated by entrenched Canadian grocery and drug retail chains such as Loblaws, Shoppers Drug Mart, and Walmart Canada.[3][41] In addition while Target Canada aimed to have its customers do "one-stop shopping", Canadians consumers generally pick and choose between different retailers' strengths. While Target Canada stores were said to be an improvement over the untidy preceding Zellers stores, some Canadians lamented that they missed the deals found at Zellers.[38]

Paul Trussell, retailing analyst at Deutsche Bank Securities Inc., suggested that "traffic has slowed below expectations in recent weeks, driven partly by Canadians’ perception that prices are too high, both relative to Walmart Canada and Target’s U.S. locations. While shoppers appreciate the higher quality assortment, especially in discretionary categories, the complaints on pricing were alarming." Target failed to anticipate that Canadian consumers would expect the retailer to match the lower prices in its U.S. stores,[42] leading to some alienation and confusion, although Target CEO Gregg Steinhafel defended this practice saying "trying to compare prices at Target Canada with that of certain Target stores in the U.S. would be like comparing prices in Boston to prices in rural Iowa". Deutsche Bank’s pricing survey on 31 health, beauty and food items at Canadian Target and Walmart stores found that while Target had a cheaper basket of goods by 19¢, Walmart had a pricing advantage of 65% of the popular items in the basket thanks to its own pricing “rollbacks,” likely furthering consumers’ current price perceptions. Other American chains operating in Canada did not suffer a backlash from Canada-U.S. pricing disparities as much, likely as Target had hyped its Canadian stores to provide the same experience as their U.S. counterparts.[3][41]

Target has projected for its Canadian operations to bring in ten percent of its profits by 2017. However, experts suggested that it wanted too much and too quickly from Canadians, while underestimating domestic competition.[42] The disappointing results from Canadian stores were said to be a major reason, along with the January 2014 major security breach, for the resignation of parent company CEO Gregg Steinhafel, though Target reiterated its commitment to the Canadian market.[43] Two weeks after Steinhafel's abrupt departure, Target Canada president Anthony S. "Tony" Fisher was dismissed and replaced by Mark Schindele, who had been serving as Target's senior vice-president of merchandising operations.[38][44]

2015: Closure

On January 15, 2015, Target announced that it will close all of its 133 Canadian stores, 22 months after they first opened. The subsidiary was projected to only make a profit by 2021, [7][45] by 2015, Target had lost $2.1 billion.[46] Some analysts state that the Canadian stores lacked the U.S. "Target experience", having a reduced selection and higher prices than found in the U.S., leading to a lack of sales.[47]

At the time of liquidation, Target had 133 stores with one more at Harbour Plaza condo project at the South Core in downtown Toronto that did not open due to the closure.[48] Target then filed for bankruptcy.

Timeline

2011

  • 12 January: Agreement signed.[2]
  • 13 January: Announcement of sale.[11]
  • 26 May: Announcement of first 105 site selections.[17]
  • 24 June: Announcement of resale of 39 selections to Walmart.[4]
  • 23 September: Announcement of final 84 site selections and partnership with Sobeys.[18]

2012

  • 31 January: Earliest possible date that Target might require some acquired locations to be vacated by Zellers.[2]

2013

2014

2015

  • 15 January: Target announces it is ceasing all Canadian retail operations and will proceed to close 133 outlets.[7][8]

Trademark issues

In the absence of the Target Corporation chain in Canada, a number of retail companies, without any affiliation to the American company, made use of the "Target" name for various purposes. A regional variety store chain in Newfoundland and Labrador operated under the Target banner during the 1980s and early 1990s. There has also been a liquor store named Target Liquor in Alberta,[50] and a Target convenience store chain based in Toronto.[51]

In advance of its entry into Canada, Target Corporation attempted to solidify its rights to the "Target" brand name in Canada by buying out the Canadian trademark rights of some these existing users,[50][51] in addition to filing new applications of its own.

Target Apparel trademark agreement

However, Target's expansion into Canada was threatened by one other party that claimed the Canadian rights to "Target" with respect to clothing. The Canadian trademark "Target Apparel" was registered in 1981 by Dylex Ltd., a Canadian retailer defunct since the early 2010s, covering "men's clothing, namely suits, pants, jackets, and coats". The rights to the mark were acquired in 2001 by Fairweather Ltd., part of the INC Group of Companies owned by Isaac Benitah.[52] Target Apparel originally served as a private-label clothing brand, and not as the name of a retail store, and Fairweather would not apply to extend its trademark to cover retail services until April 2011.[53]

INC Group opened a small Target Apparel retail store adjacent to the company's head office in December 2003.[53][54] In late 2010, soon after Target's announcement that it planned to expand into Canada (but before the Zellers announcement), INC began expanding the banner to other higher-profile locations, including conversions of some of its existing Labels stores.[54][55] Target challenged INC's rights to the Target Apparel trade name on numerous occasions; INC had succeeded in retaining those rights, but faced a further court challenge with a trial set to start in 2012.[54][56]

On February 1, 2012, it was announced that Fairweather Ltd. and Target reached an agreement concerning the use of the Target name in Canada. Under said agreement, Fairweather would cease use of the Target Apparel name by 2013, giving Target Canada complete ownership of the Target brand in Canada.[57]

References

  1. ^ a b c "Press Releases - Target Canada takes steps to ensure a fair and orderly exit..." Target. Retrieved 15 January 2015.
  2. ^ a b c d e "Transaction Agreement between Zellers Inc., Hudson's Bay Company, Target Corporation and Target Canada Co". U.S. Securities and Exchange Commission. 2011-01-12. Retrieved 2011-03-28.
  3. ^ a b c "Target Canada still plagued by price perception problems as sales fail to meet expectations | Financial Post". business.financialpost.com. Retrieved 2014-06-01.
  4. ^ a b c "Hudson's Bay Company Confirms Final List of 189 Zellers Locations to be Assumed by Target". Canada Free Press. September 23, 2011.
  5. ^ a b c d e f "Target Confirms Store Locations Opening in 2013". Target Corporation. Retrieved 2012-10-24.
  6. ^ Target Corporation Factcard (PDF)|date=May 21, 2014|accessdate=June 28, 2014
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  8. ^ a b Target Canada, Target Corporation Announces Plans to Discontinue Canadian Operations press releases, Target Corporation, 15 January 2015
  9. ^ Freeman, Sunny (2012-07-27). "Zellers stores could soon be extinct". Metro News. Retrieved 2012-10-24.
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  38. ^ a b c "The New York Times". nytimes.com. Retrieved 2014-06-01.
  39. ^ [1][dead link]
  40. ^ "CBC News-Target won't entice border shoppers to stay home". CBC News. Retrieved 2014-06-17.
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  45. ^ CBC News, Target's launch into Canada: 'A multifacted failure', Mark Gollom, 16 January 2015
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  47. ^ Winnipeg Free Press, How was Target's aim so bad?, Geoff Kirbyson, 16 January 2015
  48. ^ http://www.thestar.com/business/real_estate/2015/01/15/target-pullout-leaves-condo-project-in-the-lurch.html
  49. ^ "New Target locations open". Retrieved 2014-06-17.
  50. ^ a b Canadian Intellectual Property Office (2011-06-28). "Canadian Trade-Mark Data: Application No. 1021150 / Registration No. TMA375459". Retrieved 2011-07-01.
  51. ^ a b Canadian Intellectual Property Office (2011-06-28). "Canadian Trade-Mark Data: Application No. 0633226 / Registration No. TMA375459". Retrieved 2011-07-01.
  52. ^ Canadian Intellectual Property Office (2011-06-21). "Canadian Trade-Mark Data: Application No. 0460725 / Registration No. TMA261305". Retrieved 2011-06-27.
  53. ^ a b Canadian Intellectual Property Office (2011-06-21). "Canadian Trade-Mark Data: Application No. 1521944". Retrieved 2011-06-27.
  54. ^ a b c Strauss, Marina (2010-10-14). "Target has a problem. Its name is Target". The Globe and Mail. Toronto. Retrieved 2011-07-01.
  55. ^ Carmichael, Harold (2010-12-??). "Target Apparel opens up". Sudbury Star. Retrieved 2011-07-01. {{cite web}}: Check date values in: |date= (help)
  56. ^ The Canadian Press (2011-06-24). "Target bid to block Target Apparel name rejected". CBC News. Retrieved 2011-07-01.
  57. ^ Shaw, Hollie (2012-02-01). "Target settles name game dispute". Financial Post. Retrieved 2012-02-05.
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