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Thread: Target

  1. Default Target

    From: http://www.macleans.ca/business/econ..._108088_108088
    ___________
    We want Target
    Canadian consumers are clamouring for U.S. brands, so why are American retailers scared to cross the border?
    JOHN INTINI | August 6, 2007 |

    Next time you're at the mall, ignore, if you can, the larger-than-life supermodel staring back at you from behind the glass at La Senza, the Apple store's high-tech gadgets, and the overpowering scent wafting from Abercrombie & Fitch. Instead, focus on whether you're getting everything you really want. Because no matter how all-American everything appears, Canadians continue to miss out on the much wider selection of goods and lower prices afforded to our southern neighbours. And it affects how we shop.

    Shopping in a large American mall, say experts, devalues a Canadian's experience back home. It causes retail envy -- the sense that your shopping bag in Canada is half empty -- which can be damaging to the bottom line of Canadian business. In fact, some say that just the knowledge that many of the brands people see advertised on TV are not available to them can affect consumers' general sense of satisfaction. "There can be a let down when people go to a mall in Canada and don't find all the brands that they know are out there," says Robert Hutton, the executive vice-president of Pollara, a Toronto-based market research firm. "It affects their purchases from other retailers."

    Although an increasing number of U.S. chains have set up in Canada in recent years (just last month, for instance, Forever 21, another of the trendy, low-priced American clothing stores, opened its Canadian flagship store in downtown Toronto), many stay away. In fact, there are dozens of big-name, only-in-America holdouts -- including department stores (Lord & Taylor, Macy's and Saks Fifth Avenue), clothing chains (J.Crew, Kenneth Cole and Anthropologie) and personal care shops (Bath & Body Works).

    But perhaps no U.S. shopping experience is more coveted than an afternoon at Target. The deep-discount department store, with its racks of dirt-cheap designer duds, has a huge following among border-hopping shoppers from Canada. For some hard-core enthusiasts, Target is the only required stop on a day trip to the U.S. (unless of course there's time to hit another Target across town). But the chain's popularity breeds contempt -- and shoppers are apt to take aim at retailers back home. "If someone goes to Target and then comes back to Canada and shops at Zellers or Wal-Mart they aren't as happy," says Maureen Atkinson, a senior partner at J.C. Williams Group, a Toronto-based retail consulting firm. "They become more demanding, less satisfied."

    While retail envy is an issue for the budget conscious among us, Atkinson says that it is even more likely to affect those shopping for luxury goods. "If you're spending $2,000 on something, you want exactly what you want," she says. "So if the Chanel store in Toronto doesn't have the same selection as the Chanel store in Paris, you might wait to go there."

    On both the high and low end of the spectrum, this diminished selection of goods helps to explain why so many Canadians shop on the Internet. In 2005, Canadian adults placed more than 50 million orders and spent $7.9 billion online. And that doesn't even include the under-18 set. While companies like J.Crew and Victoria's Secret make it quite easy for Canadians to shop online, for many people logging on still doesn't replace the feeling that comes from uncovering that hidden gem in the sale section of your favourite store.

    There is certainly no shortage of success stories when it comes to American retailers coming to Canada. Many -- including Best Buy, Home Depot and the Pottery Barn -- have become dominant players in their respective categories. So if we're such an easy target, why aren't more U.S. chains taking a shot? Especially considering the geographic proximity and cultural similarities between the two countries. It turns out, the list of reasons is long. Some companies determine the move to be too costly, due to Canada's higher taxes and the costs associated with setting up the necessary corporate infrastructure. Other companies worry that Canadian consumers will lose interest in brands that they lusted over while on vacation if they're suddenly easy to get -- Old Navy, for example, entered the Canadian market in 2001 amid great fanfare but has seen interest cool off rapidly.

    For others, Canada's small population is a major turnoff. The concern for high-end retailers isn't so much the overall head count, but the size of their target market. That's a problem, says David Gray, of Sixth Line Solutions, a Vancouver-based retail consulting firm, because "there are probably as many super wealthy people in Florida as there are in Canada." And there may be bigger and better opportunities in other parts of the world -- or perhaps within the U.S. domestic market. Earlier this year, Target announced that their main focus right now is building the brand at home (the company hopes to expand from their current 1,502 American stores to about 2,500 in the U.S. by 2017), and markets beyond their borders could wait.

    Much of this, according to other experts, misses the big picture. "Quite a few major U.S. retailers don't understand the Canadian market," says Hutton. "They haven't taken the time to look at it or simply undervalue it." Large American chains lacking northern exposure may be looking at Canada's existing retail landscape, he says, instead of the "potential landscape" that includes them in it as well. "It's easy for a company to do a survey of shoppers and find out there is not enough demand," he says. "It's a very different thing to do a survey that finds out 'if we were here, what would the demand be?' " Of course others, not wanting to start from scratch, may simply be waiting for the right deal to come along (when Wal-Mart and Best Buy first broke into Canada, they acquired real estate through buyouts, which made the transition a little bit easier).

    Many argue that Canada is a great testing ground for American companies trying to develop a global strategy. And it's not like we don't have money to spend. "The potential is here," says Hutton. "The level of awareness of U.S. brands in Canada is extraordinarily high." Data, compiled by Pollara, reveals that Canadians rate U.S. retailers higher than Canadian ones when it comes to customer service and overall enjoyability -- in some cases, without even having been to the store. We just assume it's better.

    Continued Below


    This heightened awareness of the next best thing leads to another common frustration. Often highly buzzed-about products are not made available in Canada until months after hitting the shelves in the U.S. Some think that this exclusionary rollout strategy is a big mistake. "Canadians are very strong early adopters -- more so than Americans and Europeans," says Hutton. "By ignoring Canada early on, you ultimately reduce demand for the product." Hutton claims that Canadians are better than Americans at getting the word out about new products, which can really pay off for a company trying to advance a brand. "While Rome or Tokyo may seem more glamorous," he says, "Canadians have greater street-level influence."

    That helps to explain why so few U.S. chains have failed after making the move to Canada. Often these deep-pocketed multinationals identify an underdeveloped market and capitalize on pent-up demand among Canadian consumers, at least in the short term while setting things up. And once here, the competitiveness of American chains often changes the rules of retail engagement.

    Unfortunately, the same can't be said about most Canadian firms that have tried to go south. The list of companies that tanked in their efforts to break into the U.S. include Canadian Tire, Mark's Work Wearhouse and Future Shop. An overall lack of brand awareness is one major challenge since Canadian advertisements don't trickle down to Americans. Making things tougher is the fact that U.S. retailers are generally considered to be stronger, more innovative competitors. "There are a lot of stories of Canadian retailers going south, putting a foot in the water, getting a little burned and heading back," says Gray. "When Americans come to Canada they commit to it. And even if there are problems early on, they invest what they need to make it work. They're more competitive. We call it cutthroat. To them, it's just good business."

    The competition -- in fact, the mere threat of expansion from the U.S. -- is thought to be one factor keeping homegrown retailers sharp. "The weak and the unstrategic have gone by the wayside in Canada," says Gray. Companies are forced to work harder to secure enough of the market and make coming to Canada not all that enticing for American retailers. Take, for instance, the Canadian drugstore market. Shoppers Drug Mart and Rexall, among others, have done such a good job cornering the market that American companies don't consider it worth their time.

    Most Canadian retail sectors, however, have plenty of room for more players. And the strength of the loonie is sure to complicate matters by sending Canadians over the border in record numbers this summer -- day trips that will result in trunks filled with shopping bags and a greater awareness among Canadian consumers of what's missing in malls back home.


  2. #2

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    It irks me that our Loonie is pretty much on par with the US dollar, yet pricing here still remains so much higher. Ever look at book-jacket pricing? What's the deal?? Okay, our tax system is crippling for alcohol and restaurants etc, but what about retail?

    Also, I think US retailers are finally starting to wake up to the fact that although Canada has a relatively small population as a whole, we are essentially an urban country with three major urban areas (with a fourth one growing) that rival most average US urban areas in size and density. Target has been talking about crossing the border for years now, but it has some licensing issues to resolve first.

  3. #3

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    Also, there are only three areas which are widely spread out, which adds to costs. Not to mention the different tax and accounting regimes, and having to relable everything.

  4. #4

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    Quote Originally Posted by Tewder View Post
    It irks me that our Loonie is pretty much on par with the US dollar, yet pricing here still remains so much higher. Ever look at book-jacket pricing? What's the deal?? Okay, our tax system is crippling for alcohol and restaurants etc, but what about retail?

    Also, I think US retailers are finally starting to wake up to the fact that although Canada has a relatively small population as a whole, we are essentially an urban country with three major urban areas (with a fourth one growing) that rival most average US urban areas in size and density. Target has been talking about crossing the border for years now, but it has some licensing issues to resolve first.
    I'm not sure that Target has been talking about it so much as Canadians have been speculating about it. And licensing issues or not, the Macleans article claims that Target has announced that it wants to focus on some pretty ambitious growth targets in the U.S. before expanding to foreign markets.

    I agree, though, about being irked by the pricing. We're just too accustomed to paying the higher price. Just bought a coffee maker at Williams Sonoma (only Canadian distributor) that was significantly cheaper in the U.S. Bought it in Toronto, though, because I just don't think making a special trip to Buffalo is worth it to save the price differential. Now, if I had more free time.....

  5. #5
    MajorComplainer Guest

    Default

    Quote Originally Posted by Tewder View Post
    It irks me that our Loonie is pretty much on par with the US dollar, yet pricing here still remains so much higher. Ever look at book-jacket pricing? What's the deal?? Okay, our tax system is crippling for alcohol and restaurants etc, but what about retail?

    Also, I think US retailers are finally starting to wake up to the fact that although Canada has a relatively small population as a whole, we are essentially an urban country with three major urban areas (with a fourth one growing) that rival most average US urban areas in size and density. Target has been talking about crossing the border for years now, but it has some licensing issues to resolve first.
    No kidding!
    Was checking Canon SD800IS. Amazon.com, $300US NO TAX. Here, Futureshop/Bestbuy etc is selling around $450 plus tax!

    Heroes DVD, Amazon.com is at $30US, Amazon.ca is at $50, WTF!!!

    I want to contribute my spending in Canada...but can't cause US is much cheaper!

  6. #6

    Default

    This isn't a thread about Target. It's about Canadian retail prices vis-a-vis U.S. ones.

  7. Default

    Quote Originally Posted by Skeezix View Post
    This isn't a thread about Target. It's about Canadian retail prices vis-a-vis U.S. ones.
    If you're looking for a purely linear posting style at all times, you're in the wrong forum.

  8. #8

    Default

    Quote Originally Posted by RJR123 View Post
    If you're looking for a purely linear posting style at all times, you're in the wrong forum.
    Uh, not quite sure what you're talking about. This isn't really a case of "linear" posting style vs. "non-linear" posting style. I'm just pointing out that the thread isn't really about Target -- it's about U.S. retailers and U.S. prices. Target was mentioned as an example. So were others.

  9. Default

    It started out as a thread specifically about Target but quickly veered off into another direction as happens, but then someone will inevitably bring it back to the original topic, as your posting did.

  10. Default

    It started out as the main retail thread and fragments got spliced up into a "Target" thread.

  11. #11

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    Quote Originally Posted by RJR123 View Post
    It started out as a thread specifically about Target but quickly veered off into another direction as happens, but then someone will inevitably bring it back to the original topic, as your posting did.
    The first post isn't about Target -- it's about a whole bunch of American retailers. And I didn't bring it back to its "original topic". I just pointed out that the whole thing is mislabeled.

  12. #12
    Join Date
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    Default

    i like turtles
    member since april 23 1847. over 250 539 posts in morse on ticker tape, 368 067 by mail and 40 033 over the internet. 75 posts sent by pigeon & 25 by dog but only 12 arrived.

  13. Default

    Quote Originally Posted by Prometheus The Supremo View Post
    i like turtles
    Target sells lovely plastic ones.

  14. #14

    Default

    Quote Originally Posted by RJR123 View Post
    Target sells lovely plastic ones.
    That made me laugh.

  15. Default

    In all seriousness, I would love for Target to set up shop in Toronto. Having visited one of their US locations it's pretty easy to see why they are so successful.

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