Hey there, time traveller!
This article was published 25/11/2013 (1106 days ago), so information in it may no longer be current.
TORONTO -- Now that American retailers have landed in Canada, prepare for the fireworks as stores launch massive promotions and deep discounts in an attempt to draw shoppers.
The arrival of Target and Marshalls -- and the expansion of Walmart -- hasn't revolutionized shopping, but it has laid the foundation for what industry watchers say will be a bigger fight for market share next year.
"We can expect to see some very desperate retailers," said Brynn Winegard, a marketing expert at Winegard and Company.
"A lot of organizations will be vying for the same amount of consumer dollars."
For shoppers, that could mean significant price reductions, buy-one-get-one-free offers and similar promotions, while price-matching and lax exchange rules set precedents.
And the spectacle won't be limited to the big U.S. chains, as even domestic companies such as Canadian Tire, Joe Fresh and Indigo will ramp up the spectacle around their own operations.
Much of this competition was supposed to play out earlier this year when Target first set foot in the country amid a level of hype rarely seen in the industry. But the retailer failed to impress consumers, especially those who had loyally crossed the border to shop at its U.S. Target locations.
A survey released by Level5, a brand strategy adviser, found consumer sentiment for Target is on level with the struggling operations of Sears Canada.
Some customers likened Canada's version to "Target Lite," with lacklustre) prices and an atmosphere that, despite renovations, still had the feel of the Zellers outlets that occupied the same spaces for years before.
"First impressions are big, and so Target's not getting off to a great start," said Bobby Hagedorn, a retail industry analyst at Edward Jones, who said the misstep gave competitors a lead.
"All the Canadian companies are now running and seem to be more prepared than they were before. We're in a period of transition."
Despite the time spared, the U.S. challengers are plentiful and diverse, with big names such as Microsoft setting up shop while more niche retailers, such as Zara Home, and women's clothing shops Ann Taylor and Black House, White Market, vie to corner their own segments.
In department stores, Hudson's Bay Co. struck an agreement to bring Saks Inc. to Canada while next year upscale retailer Nordstrom enters the mix nationwide with locations acquired from Sears Canada.
One of the most competitive spaces will be grocery stores, where intermittent price wars have waged on for years. The recent rollout of competitively priced produce sections at Walmart supercentres has added to the pressure, while Target also launched a mini-supermarket inside its stores.
Add Amazon.com Inc. to the list after the Internet company opened a virtual supermarket in Canada that ships non-perishable food items directly to consumer's homes.
In response, Canadian grocery chains have ramped up consolidation to grab a stronger market presence and more buying power with manufacturers, which helps keep their prices lower. Earlier this year, Loblaw agreed to buy Shoppers Drug Mart Corp. while Sobeys picked up the Canadian assets of U.S. grocer Safeway.
It's debatable how much the heightened activity in Canada has convinced shoppers to stay within the country.
Data from Statistics Canada shows a climb in the number of trips to the United States throughout the year, encouraged by the introduction of higher duty-free allowances and a steady exchange rate.
In September, 2.74 million cross-border day trips were made by car, a 1.2 per cent increase from the busy August summer travel season when 2.67 million trips were made.
Year by year, the number of same-day trips are rising, too. In 2010, Canadians made 26.3 million trips, rising to 31 million the next year, and 32.4 million in 2012.
While it's difficult to determine how many of those were shopping trips, the data are still an indication Canadians aren't staying home in huge numbers.
Retailers also face tepid consumer spending growth, which in recent months has inched ahead only slightly. Economists predict Canadians will remain cautious about their finances and keep spending low into next year.
In September, home renovations retailer Rona chief executive officer Robert Sawyer emphasized the negative effect of the U.S. entrants, telling an industry conference that "in Ontario, it's a bloodbath for every retailer."
"It's difficult, not only for the hardware business," he said.
Executives at Target have assured investors that while they may be knocked down, they're still in the game. Chief executive Gregg Steinhafel said last month the launch has "fallen well short of expectations" but he wants to "redefine" the company as a one-stop shop for Canadians.
Already Target has launched advertisements that emphasize its weekly flyer discounts, and its position as the "all in one place" holiday shop.
But Target won't be alone in that quest as other retailers will follow a similar plan to "increase their basket size," an industry term used to track how many items a shopper piles into their cart each visit, said Winegard.
The most effective way to fill carts is through buy-one-get-one-free and major discounts. However, Winegard warned that while it has an immediate upside for consumers, it'll have a ripple effect on the industry.
Too many deals typically result in a practice she calls "pantry loading," which is when people stock up on non-perishables, such as mouthwash and clothes, and then visit stores less frequently to spend money -- a factor that could knock the wind out of retail sales figures.
Those discount practices will also filter out weaker companies within three to five years, she said.
In clothing, that could force smaller-label brands and boutiques to shut their doors.
Winegard said one lesson many U.S. retailers haven't learned is Canada is a diverse country with buying patterns that vary by region. What works in Toronto won't necessarily catch on in Winnipeg or smaller cities in Quebec, for example.
Those factors could drive retailers to get creative with how they sell to consumers.
"It's what capitalism boasts," she said. "It's a great time for innovation and viable competitors to really sharpen their chops. The ones that don't do that will perish."
-- The Canadian Press