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Originally published Thursday, January 15, 2015 at 7:29 PM

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Wal-Mart’s low prices, long johns beat Target in Canada

Wal-Mart has been operating in the country for two decades — a track record Target was aiming to duplicate when it embarked on a plan to enter Canada in 2011. Instead, Target drew complaints of high prices and poorly stocked shelves.


Bloomberg News

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Target’s disastrous Canadian expansion might best be summed up by Colleen Peacock, a 48-year-old who loved shopping there because the store was so empty.

“I guess that’s part of the problem, and why they’re closing,” Peacock said this morning at a Target in Toronto. “They just couldn’t compete.”

With Target closing its operations in Canada, Peacock will have to head to a more heavily trafficked Wal-Mart store, which she says offers lower prices anyway. She won’t be the only one. Target’s retreat, announced Thursday, is a late Christmas present for Wal-Mart Stores, which has already enjoyed more success in Canada than many of its overseas markets.

Wal-Mart has been operating in the country for two decades — a track record Target was aiming to duplicate when it embarked on a plan to enter Canada in 2011. Instead, Target drew complaints of high prices and poorly stocked shelves.

For Wal-Mart, Target’s retreat represents a bright spot for a retailer that has struggled to prosper in other markets, including Brazil and China. In its most recently reported quarter, Wal-Mart’s Canadian sales rose 3.3 percent, double the rate of its international division.

“It’s the biggest New Year’s gift Wal-Mart is getting anywhere worldwide,” said Burt Flickinger, managing director at Strategic Resource Group, a retail consulting firm.

Billions in losses

Target, based in Minneapolis, made the decision to pull out of Canada after posting more than $2 billion in operating losses. It’s taking a write-down of $5.4 billion to shut down the chain, which has 133 stores and more than 17,000 employees. The division, which had sought to generate $6 billion in annual revenue by 2017, posted sales of $1.3 billion in the first three quarters of this fiscal year.

When Target opened its first locations in Canada in 2013, local competitors had reason to fear. Many Canadians had already been shopping at Targets across the border and were looking forward to the stores opening closer to home. The chain’s hip marketing campaigns and designer products also appealed to younger consumers.

Debut disappoints

Target’s debut ended up being a disappointment. Prices were higher than what Canadians were used to paying across the border, and the selection didn’t match local tastes. The company also struggled to keep some items in stock.

For Hresa Chatz, that was a source of frustration. At a Toronto store Thursday morning, she failed to find long underwear for her nephew — despite its being winter in an icebound nation. She left empty-handed.

“It seems like it doesn’t matter what time of the day or week we come in, they’re always sold out of the long johns,” said the 42-year-old, who runs an ice-cream shop. “It never seems to be on the shelf.”

While Wal-Mart has had its own struggles stocking shelves — and growth in its home country has slowed — the company’s operations in Canada have run more smoothly. Wal-Mart also had much more experience overseas, with stores in 27 countries.

Target struggled to adapt to Canadian customs. That includes its bilingualism. When Target opened a store in Westmount, Quebec, in 2013, all the signs were in French, said Nicole Gareau, a 64-year-old native English speaker.

“They weren’t welcoming me to their store, so I didn’t shop there,” said Gareau, who liked the brand before its arrival because Oprah Winfrey promoted it on her show. Meanwhile, every other store she shops, including Wal-Mart, had signs in both languages.

“When I shop, I like to shop in my language,” she said. “I like the choice.”

While Target was stumbling, Wal-Mart focused on improving operations there to stave off this new competitor.

The world’s largest retailer remodeled Canadian stores and expanded supercenters, moves that have gone over well with customers, Chief Executive Officer Doug McMillon said in November.

“They’re operating big stores with lots of merchandise, selling it at great prices and undercutting local grocery chains,” said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis.

Wal-Mart opened locations in Canada in 1994 when it acquired the Woolco chain. The Bentonville, Ark.-based company now has more than 370 discount stores and supercenters there, with about 90,000 employees.

Target never convinced Canadians that it was superior to Wal-Mart, said Barry Schwartz, a fund manager at Baskin Wealth Management in Toronto.

And that made it tough to compete with a 20-year incumbent.

“There was nothing unique about what Target had to offer,” he said. “It was another version of Wal-Mart.”

With assistance from Ari Altstedter and Eric Lam in Toronto



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