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Parity issue with U.S. stores addressed

Costs here higher, Canadian boss says

Hey there, time traveller!
This article was published 6/5/2013 (1567 days ago), so information in it may no longer be current.

TORONTO -- Target Canada president Tony Fisher addressed the sticker shock gripping some consumers who expected the retailer's prices would be on par with its U.S. stores when it opened its first Canadian outlets in Ontario last month.

The hot-button issue of Canada-versus-U.S. retail pricing was the subject of a Senate committee report this year and resurfaced in last month's federal budget when the government announced it would drop tariffs on hockey gear and baby clothing.

Fisher told a Canadian Club of Toronto luncheon Target knew it would have to be competitive with other retailers operating in the Canadian market, whether they be U.S.- or Canadian-owned. "We built this business model to be successful in Canada," he said, which involved a detailed business analysis of what it takes to compete in the local marketplace alongside other large retailers -- most notably, key U.S. rival Walmart.

"There has been a lot of widely publicized discussion around why the retail prices are not on parity," Fisher said.

Last year, a BMO study estimated Canadian retail prices are roughly 14 per cent higher than in the U.S.

"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," he said.

Fisher reiterated a promise of offering "highly competitive" prices here and said he is not deterred by the notion of consumers who still want to cross the border to shop at Target in the U.S.

"I still work for Target," he said. "We are not trying to compete with ourselves -- we want to come in and compete with the retail landscape here."

Despite some consumer gripes in social media, the company's out-of-the-gate success in its initial three "soft openings" in Ontario saw Target swamped with overly high demand. It "was a good problem to have," Fisher said, adding it was hard to keep inventory on the shelves given the high sales volume. "We knew from the beginning we were not going to be perfect immediately."

Fisher said moving from Minnesota last year to a Toronto suburb as a consumer who needed to furnish his house and buy his kids sporting goods provided him with a good education about the retail scene in Canada.

"There just isn't the same breadth of options from a one-stop shopping experience," compared with the U.S., he said. "I'd find myself going to a lot of different retailers, and it helped me learn the competitive landscape, but it also helped me learn about where we could fit in to this marketplace."

-- Financial Post


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