Target surprises Canadian retail market with three store openings on Tuesday

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Snow is piled in the parking lot of the new Target store in Guelph, Ontario. Target announced that it is opening three pilot stores in Guelph, Fergus and Milton, Ontario March 5, 2013, the first of 124 Target stores to open in Canada, Media were given a preview tour, Monday, March 4, 2013. THE CANADIAN PRESS/Dave Chidley

GUELPH, Ont. - Shoppers on the hunt for a bargain will get their first chance to see Target in Canada starting Tuesday as the U.S. retailer opens its doors north of the border at three locations.

The communities, all located west of Toronto, serve as testing grounds for a phased rollout of the brand across much of the country later this year.

The stores, located in Guelph, Ont., Fergus, Ont., and Milton, Ont., will begin welcoming customers Tuesday morning starting at 8 a.m. ET as part of its "soft launch" opening.

Another 21 stores will open this month throughout Ontario, though specific dates and locations haven't been announced. The chain's "grand opening" is still slated for April.

"We wanted flexibility to make sure we open when we are ready," said Target Canada president Tony Fisher as he toured reporters through the Guelph store on Monday.

"It's important that we can test and work out any of the bugs and kinks that we might find."

Even Target employees didn't know until this week that the Guelph location was opening so soon, the company said.

Delivering an element of surprise is apparently something that Target can afford, since so much anticipation has built up around its Canadian launch.

As the media tours went on inside the store, several curious consumers drifted by the front entrance in their cars trying to catch a glimpse through the windows, which were papered with the company's trademark bull's-eye logo.

"We have some, what I would say, are very strong estimates of what our stores are gonna do, but right now they are estimates," said Fisher, without offering any further details.

What Fisher does know for certain is that Target has been gaining momentum in the domestic marketplace. Awareness of the company's brand jumped to 92 per cent earlier this year, compared to about 70 per cent in 2011 when Target first announced it would open stores in Canada, he said.

A study from Brand Finance Canada released Monday found that Target's brand strength in Canada is already considered nearly as valuable as domestic retailers like Loblaws (TSX:L), Canadian Tire (TSX:CTC.A) and Shoppers Drug Mart (TSX:SC).

Those factors have sent a chill through the Canadian retail community, and many publicly-traded companies have moved to cut costs across their operations in anticipation of the new challenges that Target could bring, especially if fellow U.S. retailer Walmart starts to slash its prices to keep customers.

"One of the things that surprised me in this marketplace is there are some great retailers here, but you do have to go to multiple stores to be able to get what you're looking for," Fisher said of shopping in Canada.

"It really reinforced the fact that we do have a great position here."

Throughout the store tour, Fisher highlighted some of the features he considered unique to the Target, including wide, well-lit and "clutter-free" shopping aisles.

The Guelph store also had a small groceries section and mannequins in its clothing section, which he said is a rarity in U.S. Target locations.

But for the average consumer, there won't be a shocking difference in the appearance of this Target store compared to other popular big-box retailers that sell a variety of merchandise.

For many, it'll come down to whether Target can compete with competitor's prices, a factor that Fisher said is at the top of their mind. He also emphasized the company's superior customer service, which was a key part of the launch campaign for home hardware retailer Lowe's when it came to Canada in late 2007.

"We want to make sure there are people on the sales floor ready and willing to help you," he said, noting that the Guelph location has 167 part-time and full-time staff members.

The store also stocked an array of Canadian products that included Toronto-based houseware brand Umbra and clothing company Roots, which will both be carried for a limited time, as well as food from baked goods maker Dufflet.

Target also offers an additional five per cent discount when customers pay with their branded Red Card, which is available as either a debit or credit card.

The company spent more than five years weighing its entry into Canada before making the move in 2010 when it acquired most of the real estate assets operated by Zellers for nearly $2 billion.

One of the company's biggest initial concerns was whether the Canadian properties would fit the trademark Target look, which emphasized wide aisles and a broad array of products. Ultimately, the company spent about $10 million on each location for renovations both inside and outside the stores.

Still, there were some factors the company couldn't renovate. On average, the Canadian Target stores will be about 18 per cent smaller than its properties in the United States.

The Minneapolis-based retailer selected the three Ontario test locations because they were located close to one of its distribution centres, Fisher said.

Overall, the company is expected to open between 125 and 135 locations in Canada. After the Ontario rollout, Target will begin moving into provinces in the West and eventually into Quebec. None of those opening dates have been announced.