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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.
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.
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.
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 189 Target 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.
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 Canada, was "temporarily" sold in Target Canada.
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.
Paul Trussell, retailing analyst at Deutsche Bank, suggested that "traffic has slowed below expectations in recent weeks, driven partly by Canadians’ perception that prices are too high, both relative to Walmart Canada and Target's U.S. locations. While shoppers appreciate the higher quality assortment, especially in discretionary categories, the complaints on pricing were alarming." Target failed to anticipate that Canadian consumers would expect the retailer to match the lower prices in its U.S. stores, leading to some alienation and confusion, although Target CEO Gregg Steinhafel defended this practice saying "trying to compare prices at Target Canada with that of certain Target stores in the U.S. would be like comparing prices in Boston to prices in rural Iowa". Deutsche Bank's pricing survey on 31 health, beauty and food items at Canadian Target and Walmart stores found that while Target had a cheaper basket of goods by 19 cents, Walmart had a pricing advantage of 65 percent of the popular items in the basket thanks to its own "Rollback" prices, likely furthering consumers’ current price perceptions. Other American chains operating in Canada did not suffer a backlash from Canada–U.S. pricing disparities as much, likely as Target had hyped its Canadian stores to provide the same experience as their U.S. counterparts.
Target projected for its Canadian operations to bring in ten percent of its profits by 2017. However, experts suggested that it wanted too much and too quickly from Canadians, while underestimating the domestic competition. The disappointing results from Canadian stores were said to be a major reason, along with the January 2014 major security breach, for the resignation of parent company CEO Gregg Steinhafel, though Target reiterated its commitment to the Canadian market. Two weeks after Steinhafel's abrupt departure, Target Canada president Anthony S. "Tony" Fisher was dismissed and replaced by Mark Schindele, who had been serving as Target's senior vice-president of merchandising operations. Subsequent commentators did not blame Fisher, "the odds were stacked against him from the start, given the extremely tight timeline and the thin margin for error."
Around the time that Mark Schindele took over, Target Canada had largely sorted out its inventory issues. However, Brian Cornell, who replaced Steinhafel as CEO of the parent company, was a company outsider who had reportedly pushed for Target Canada to be shut down if its financial performance did not improve.
By 2015, the subsidiary had lost $2.1 billion and was not projected to make a profit until at least 2021 assuming the COVID-19 pandemic did not happen. Target Canada would have been unable to meet its employees' payroll for the week of January 16, 2015, if it had not filed for Court protection from creditors.
Liquidation sales began at the stores the following day; Target began to close stores on March 18, 2015, with 58 locations scheduled to close that week, and 58 in total closed by April 5, 2015. The remaining 58 stores closed on April 12, 2015.
In May 2015, the company returned some of its leases back to their landlords, and began the process of auctioning off leases and properties to other new owners. Canadian Tire announced plans to acquire 12 locations, Walmart Canada reached a deal to acquire 13 locations (including the aborted Bayshore Shopping Centre location) and one of its distribution centres, and Lowe's also reached a deal to acquire 13 locations and a distribution centre. Giant Tiger also acquired a part of a Target location. Metro's discount supermarket chain Super C would open stores in two former Target stores in Quebec.
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