With Target Going North, Competition in the Canadian Retail Industry is Heating Up

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According to the Retail Council of Canada, the Canadian retail industry is poised for slow growth with little momentum on the horizon. New entrants like  Target (NYSE:TGT), which plans to enter the market by 2013, will further add the competitive environment. The council expects the challenging environment to continue through 2015, which could make it more difficult for smaller retailers to maintain their businesses.  [1] With Target’s entry into the Canada, it will face Wal-Mart (NYSE:WMT) which has a strong presence.

See our complete analysis for Target here

Canadian Retailers Try Hard to Remain Competitive

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Loblaw

  • Loblaw, the largest food retailer in Canada, is working hard to remain competitive. It is undertaking various measures to lure more customers to its stores. It has plans to introduce a loyalty card in 2013, and it plans to add more ethnic fare as well as sell Joe Fresh merchandise online.
  • This year, it has allocated $70 million to strength its information technology and supply chain and $40 million for its marketing efforts.

Wal-Mart

  • Wal-Mart presently has 333 stores in Canada. In order to strengthen its position further, it has allocated $750 million for a makeover of its existing stores.
  • Wal-Mart Canada plans to complete at least 73 projects this year including building new stores and expanding, remodeling and relocating existing stores. It plans to add 4.6 million square feet of retail space to its operations this year.

Target’s Canadian Expansion Plans

  • Target has allocated approximately $2.3 billion to convert Zellers stores and integrate them into its retail network in Canada. It plans to renovate sites, establish supply chain capabilities, and build information-technology infrastructure in Canada.
  • Target plans to open 24 stores in Ontario in March or early April in 2013.

We believe the Canadian retail industry is on the verge of a major change with stronger and more established discount retailers increasing their market share and weaker retailers gradually losing market share or being forced out of business.

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Notes:
  1. Canadian retailers warn of ‘slow growth, no momentum, BNN []