Target Canada Co. was a short-lived Canadian subsidiary of the Target Corporation, the eighth-largest retailer in the United States. Formerly headquartered in Mississauga, Ontario, the subsidiary formed with the acquisition of Zellers store leases from the Hudson's Bay Company (HBC) in January 2011. Target Canada opened its first store in March 2013, and by January 2015 was operating 133 locations throughout Canada. Its main competition included Walmart Canada, Loblaws, Shoppers Drug Mart, and Canadian Tire.
Target Canada was ultimately unsuccessful, owing in part to an overly aggressive expansion initiative, in addition to higher prices and a limited selection of products compared to Target stores in the United States and its Canadian rivals, particularly Walmart. The retail chain racked up losses of $2.1 billion in its lifespan, and was widely viewed as a failure, termed a "spectacular failure" by Amanda Lang of CBC News,Amanda Lang, Target admits it missed the mark, but what does it mean for Canadian retail?, CBC News (January 15, 2015). "an unmitigated disaster" by Maclean's magazineJason Kirby, Hey Target, here's how you expand into Canada, courtesy of Wal-Mart, Maclean's (August 20, 2014). and "a gold standard case study in what retailers should not do when they enter a new market" by the Financial Post.Hollie Shaw, Target Corp's spectacular Canada flop: A gold standard case study for what retailers shouldn't do, Financial Post (January 15, 2016). Target Canada commenced Court-supervised restructuring proceedings in January 2015, and finally shut down all of their stores by April 12, 2015, amid the retail apocalypse in Canada.
History
Trademark issues before 2010 In the absence of the Target Corporation chain in Canada, several retail companies, without any affiliation to the American company, made use of the "Target" name for various purposes. A regional variety store chain in Newfoundland and Labrador operated under the Target banner during the 1980s and early 1990s. There has also been a liquor store named Target Liquor in Edmonton, and a Target convenience store chain based in Toronto.
Before it entered Canada, Target Corporation attempted to solidify its rights to the "Target" brand name in Canada by buying the Canadian trademark rights of some of these existing users, in addition to filing new applications of its own.
Target Apparel trademark agreement Target's expansion into Canada was threatened by one other party that claimed the Canadian rights to "Target" with respect to clothing. The Canadian trademark "Target Apparel" was registered in 1981 by Dylex Ltd., a Canadian retailer defunct since the early 2000s, covering "men's clothing, namely suits, pants, jackets, and coats". The rights to the mark were acquired in 2001 by Fairweather Ltd., part of the INC Group of Companies owned by Isaac Benitah. Target Apparel originally served as a private-label clothing brand, and not as the name of a retail store, and Fairweather would not apply to extend its trademark to cover retail services until April 2011.
INC Group opened a small Target Apparel retail store adjacent to the company's head office in December 2003. In late 2010, soon after Target's announcement that it planned to expand into Canada (but before the Zellers announcement), INC began expanding the banner to other higher-profile locations, including conversions of some of its existing Labels stores. Target challenged INC's rights to the Target Apparel trade name on numerous occasions; INC had succeeded in retaining those rights, but faced a further court challenge with a trial set to start in 2012.
On February 1, 2012, it was announced that Fairweather Ltd. and Target reached an agreement concerning the use of the Target name in Canada. Under this agreement, Fairweather would cease use of the Target Apparel name by 2013, giving Target Canada complete ownership of the Target brand in Canada.
2010: Consideration of Canadian operations Regular rumours surfaced since at least 2004 that Target was interested in expanding into Canada by acquiring Zellers outright. In January 2010, Target publicly indicated long-term plans to expand internationally, likely including Canada, but that those plans would not take effect until 2013 at the earliest.
2011–2013: Leaseholds acquisition and partnership On January 13, 2011, Target announced that it would purchase the lease agreements of up to 220 Zellers stores for C$1.825 billion (approximately $2.427 billion in 2025 adjusted for inflation).John Tilak, "UPDATE 2-Target to enter Canada with Zellers deal, own plans: Target plans to open up to 150 stores in Canada", Reuters January 13, 2011. Under the agreement, Zellers would sublease the properties, and continue to operate them as Zellers locations until at the earliest January 2012 and, at the latest, the end of March 2013.
Target did not buy the Zellers chain outright, which was left with 64 stores in less desirable locations. HBC failed to find a buyer for the remaining stores and planned to continue operating Zellers as a smaller chain. However, the geographical constraints of serving these far-flung Zellers outlets meant that operating them was no longer economically viable, so HBC announced on July 26, 2012, that it would close almost all of these stores.
In May 2011, Target revealed its first 105 selections and stated that the vast majority of those in this first group would be converted to Target outlets. In September 2011, Target unveiled 84 additional selections, bringing the number of Zellers leases acquired to 189Target Finalizes Real Estate Transaction with Selection of 84 Additional Zellers Leases, Target Corp. (September 23, 2011). below the prospective upper number of 220 announced in January.Ian Austen, Target Moves Into Canada By Buying Store Chain, The New York Times (January 13, 2011). The first store opening cycle would be in March/April 2013, followed by four additional cycles later that year. Zellers locations to be converted were typically closed for six to nine months for significant remodelling and renovation. Target announced plans to hire 27,000 new employees to support its expansion into Canada, including 5,000 in Quebec, and that its food and grocery items in Canada would be supplied by Sobeys.
After the Zellers stores at the selected locations closed, Target planned to renovate between 125 and 135 of them, and reopen them under the Target banner. Target would sell the remaining 64 to 74 acquired locations to other retailers, including 39 already resold to Walmart Canada.
Unlike Walmart's entry to Canada with the acquisition of the Woolco stores in 1994, Zellers employees were not retained by Target nor Walmart, and they had to re-apply for their position to continue working in their same locations. Target Canada stated that former Zellers workers were guaranteed an interview though not a job; however, the United Food and Commercial Workers of Canada complained that many Zellers employees were not hired, including those with long years of service.
Target confirmed the list of its locations in July 2012. The chain finalized its 127 stores to open in 2013. Of this total, 125 were converted former Zellers stores. The other two locations in Niagara Falls and Centre Laval were sites that had been occupied by Walmart stores. The first Target stores in Canada were opened on March 5, 2013, in the Ontario communities of Guelph, Fergus, and Milton, being close to one of Target Canada's three distribution centres.
Target Canada had its head offices in Mississauga's Airport Corporate Centre in the same building as Pepsico Canada's offices during Target Canada's years of operation.
2013–2015: Years of operation
Target Canada had supply chain problems, but its parent company did not want the planned opening date to be delayed, since they did not want to continue paying rent on unopened stores.
On March 5, 2013, three Target stores in Milton, Fergus and Guelph, Ontario, were opened to the public and operating as test stores, and a further 17 stores in Ontario opened on March 19, 2013. Four additional stores in Ontario were opened on March 28, 2013, followed by a number of openings in three western provinces on May 6, 2013. On July 16, 2013, Target opened more stores in four provinces, including in the cities of Regina and Saskatoon. Target opened more stores between September 17 and October 18, including in the provinces of Quebec and Nova Scotia. It opened 33 locations between November 13 and 22, including in the provinces of New Brunswick, Prince Edward Island and Newfoundland and Labrador. On March 14, 2014, Target opened three stores in the cities of Toronto, Edmonton and Victoria. On August 1, 2014, it opened three stores in the cities of Barrie, Mississauga and Candiac, Quebec.
Target Canada included smaller Starbucks stores in the majority of its locations. A notable Canadian clothing brand, Roots, was "temporarily" sold in Target Canada.
Early results Target Canada president Tony Fisher expected that some Canadian consumers would continue to cross the border and shop at Target stores in the United States. Fisher acknowledged that the Canadian stores would not have price parity with their U.S. counterparts, saying "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." Because of complexities and other legal requirements, Target's existing distribution network could not be used to service Target's Canadian locations. In addition, Canadian Target stores did not have local authority to order their own merchandise; this resulted in the Windsor, Ontario, stores stocking Toronto Maple Leafs and Toronto Blue Jays apparel, instead of that of the Detroit Red Wings and Detroit Tigers, which were more popular in Windsor, given its proximity to Detroit across the Detroit River. Supply chain and demand issues also led to situations where some of the early locations were not adequately stocked in certain product categories, resulting in empty shelves. The supply chain problems were blamed on using a brand new SAP inventory software and not giving sufficient time for staff to work out the system's problems, as the parent company refused to push back the planned launch date as they did not want to keep paying rent on unopened stores.
Target Corporation's expansion into Canada hoped to capitalize on Canadian shoppers who frequently crossed the border for its U.S. stores. However, this may have backfired as Canadian shoppers felt that Target Canada stores failed to meet the high expectations set by their U.S. counterparts. Target Canada enjoyed a strong opening, but subsequent results were disappointing, dragging down its parent company's second-quarter results. Despite the initial high traffic at Target's new stores, customers were not returning frequently enough to these stores to buy the basic household items, as that market was dominated by entrenched Canadian grocery and drug retail chains such as Loblaws, Shoppers Drug Mart, and Walmart Canada. In addition, while Target Canada aimed to have its customers do "one-stop shopping", Canadian consumers generally pick and choose between different retailers' strengths, often going to different retailers whenever certain items go on sale as evidenced by Canadians sometimes carrying shopping bags from competing businesses. While Target Canada stores were said to be an improvement over the untidy Zellers stores, some Canadians lamented that they missed the deals found at Zellers.