Target Canada

Level 9

CANADA -

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2013

low population

high population

70% of Canadians are familiar with the Target brand 10% of Canadians already shop at Target

B

et on canadian market

Marketanalysis - Macroscale / Canada

Over the past years Target stores spread rapidly throughout the United States. Like a well strategized chess move Target stores started to move northwards and aligned along the U.S.Canadian border. In particular border near stores serviced the Canadian consumer and evaluated their thirst and excitement for the Target brand. Former annual data indicated that the stores in Colorado, North Dakota and Minnesota had the highest sales per capita with over $300 per person per year (Target Annual Report, 2009). The test phase appeared to be over when Gregg Steinhafel CEO and Chairman of Target announced on February 13th that Target is planning to enter the Canadian market by 2013. It was a step he claimed as a “win-win situation� for both the Target brand and the Canadian consumer. He further stated during a phone interview with CNBC that 70% of Canadians are already familiar with the Target Brand and 10% already shop at Target stores each year. He described the bet on the Canadian market as a consequent step to provide convenience and proximity to the Canadian consumer by opening Target stores on Canadian soil. On a longer run, Steinhafel plans on opening stores in all Canadian provinces, a monumental step considering the sheer landmass of Canada.

Overall, Canada is the second largest country in the world in terms of area, being only surpassed

by Russia. Nevertheless, a bigger landmass does not guarantee a greater consumer market nor consumer density. In fact, Canada’s population density of 8.5 inhabitants per square mile is among the lowest in the world and is only surpassed by countries such as Iceland and Mongolia. [Worldatlas, 2010) On the other hand the United States has a 10 fold higher overall population density with 79.6 inhabitants per square mi. (U.S census,2010). The 1:10 ratio continues to apply to the overall population of both countries, with a Canadian population of 31.6 million (Statistics Canada, 2010) versus a 308 million U.S population. (U.S. Census Bureau, 2011) Consequently, Target could face a significantly smaller overall market but also a less dense market. In fact, the northern provinces of Yukon, Northwest Territories and Nunavut embrace about 41% of the landmass but only 0.3% of the overall population (Natural Resources Canada, 2001). Moreover, the Polar Regions are characterized by untouched ice fields, snow, tundra and taiga landscapes and scattered human settlements making the establishment of a sophisticated market more difficult.

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More attention should be given to higher populated areas such as the Quebec City–Windsor Corridor; which includes the biggest urban settlements such as Toronto (Ontario), Montreal (Quebec) and Ottawa (Ontario). The area shows similar urban features to the north–east megalopolis reaching from Washington D.C. to Boston. The Quebec–Windsor Corridor is recommended as the primary market for new Target stores because of a high population density, strong retail industry, well-established urban and peripheral infrastructure as well as a close distance to the United States.

Marketanalysis - Microscale / Quebec-Windsor Corridor In terms of market potential we recommend the Quebec- Windsor Corridor as the primary market. The primary market will be satisfied with the initial wave of new store openings in Ontario and Quebec Ontario beginning in 2013. It is expected that the primary market will eventually have the highest density of Target stores. The primary market is considered as the most lucrative market to the Target brand and will set the tone for further store openings. The primary market will also provide an instrument of measurement to determine the success of the Target brand on Canadian soil. The provinces Ontario and Quebec collectively add up to an estimated population of 19.5 million making an estimated 54% of the overall population. John Torella, Senior Partner of J.C Williams Group states that within a 1-hour flight time from Toronto there exists a bi-national market with an estimated economic value of $550 billon making it the 12th largest market in the world [Canadian Advertising Research Foundation, 2008]. It is expected that store-openings close to the border could Quebec - Windsor Corridor attract the Canadian consumer as well as American consumers due to the lack of sufficient retail structures or non-competitive product and Population 19.5 million service offerings. Canadian consumers living close to the border are [54% of Canada] assumed to have an already established familiarity with the Target brand. $ 550 billion economic Online searches on domains such as www.google.com and value www.answers.com showed Canadian consumers having increased interest in finding Target stores close to the border. The Quebec 12 th largest market Windsor Corridor is subdivided into the two distinguished provinces of worldwide Quebec and Ontario. Ontario accounted for an overall share of total operating revenue of 36 % highlighting the strongest retail economy in Canada. Quebec reinforced its strong retail sector and accounted for 22% of all Canadian retail revenue (Statistics Canada Annual Retail Trade, 2008). Combined both provinces account for more than half of the total retail Canadian revenue reinforcing their- position within the primary market. Both provinces show differences in their cultural, economic and demographic build up but also consumer expectations.

Quebec

Canadian Retail market /// After a predominantly recessive economy throughout the past years it was important to determine the healthiness of the Canadian retail sector. The Canadian retail sector recovered quickly and within the appropriate markets. The retail sector grew 34% faster than the U.S. retail sector and was 96% greater than the Canadian Economy between 2004 and 2008 (Statistics Canada.CANSIM, 2010. & United States Census Bureau Annual Retail trade Survey, 2008). The table below supports this fact and shows that Canadian retail growth continued to outpace the U.S. retail sector over the past several years.

10

Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4 Canada

% growth

United States

5 0 -5 -10 -15

2007

2008

2009

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Retail sector year by year sales growth [2007 - 2009, by quarter]

Overall the retail sector showed positive tendencies and represented 6.2% of the Canada’s gross domestic product (GDP). Alberta’s and British Columbia’s retail sectors had the largest sales decline during the economic downturn (Statistics Canada CANSIM, 2010) representing 14.4% and 13.2% of total operational retail revenue respectively. Ontario accounted for an overall share of total operating revenue of 36 % highlighting the strongest retail economy in Canada. Quebec reinforced its strong retail sector and accounted for 22% of all Canadian retail revenue (Statistics Canada Annual Retail Trade, 2008). Combined both provinces account for more than half of the total retail Canadian revenue reinforcing their position within the primary market.

In regard to product offerings, furniture stores,

home electronics, appliance stores, home centers and hardware stores experienced the largest economic downturn. On the other hand supermarkets, pharmacies, personal care and general merchandise stores showed throughout positive growth in sales and profits (Statistics Canada CANSIM,2010). Over the past years the overall share of the Canadian retail market has shifted towards chain stores with their market share increasing from 39% in 1999 to 47 % in 2008 (Canadian Retail Council, 2010). Chain stores operating revenue out powered that of non- chain stores in almost every trade group.

Pharmacies and personal care stores showed a different result due to the fact that several provinces acquire pharmacies to be owned and operated by a pharmacist or a company with majority shareholders or directors who are pharmacists.

Target must consider outsourcing the Pharmacy to a private Pharmacist owned company. Competitor Walmart solved the problem by introducing affiliated owner operated Pharmacy stores called Access pharma chez Walmart (Walmart Access Pharma, 2011). Overall, Supermarkets and general merchandise stores showed the highest total operational revenue and outnumbered the revenue of non-chain stores dramatically (see table below).

Operating revenue by retail tarde group in $ billions (2008) 0

5

10 15 20 25 30 35 40 45

Supermarkets

Supermarkets Pharmacies

Department stores and other general merchandise stores

General merchandise stores

Clothing stores Home centres and hardware stores Home electronics and appliance stores

Furniture stores

Furniture stores

Home electronics

Pharmacies and personal care stores Convenience and specialty food stores Home furnishings stores

Appliance stores Chain

Hardware stores

Non-chain

In 2009 the Canadian retail sector sold food and beverages worth $98.9 billion in overall sales making this the primary trade group. The overall sales number set a record high in sales highlighted by a 5.4% increase since 2008. The increasing trend was also noticeable in the spending behavior of Canadian consumers. In 2008 Canadian Consumers spent in average 10% of their household earnings on food. On top of the spending list were personal taxes 21%, shelter 20% and Transportation 14% (Canada year book, 2010, p.223).

Supermarkets discovered an increasing competition from general merchandise stores. For the last few years general merchandise stores, started offering food items in addition to general merchandise. Increasing sales margin for groceries created a shift in merchandise sales. In 2009 sales for food and beverage items accounted for 21% of overall merchandise sales surpassing traditional merchandise groups such as clothing, footwear and accessories. Other sectors such as clothing and accessories, home essentials (tableware, hardware etc.), and hardlines saw a yet more conservative increase in sales.

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Overall general merchandise stores increased by 2% to $52.2 billion in 2009 ranking 2nd after Supermarkets (Canada year book, 2010, p.345). After all, the primary market in Ontario and Quebec showed the highest retail revenue. Collectively, both provinces made more sales than the remaining provinces combined. Alberta’s and British Columbia’ followed in 3rd and 4th place respectively. The Canadian retail environment is a suitable fit for the product offerings of the Target brand. Product categories offered by the Target brand are in high demand and show the greatest sales or increase in sales. In addition, the primary market reinforces its strong position as the backbone of the Canadian retail economy.

Marketanalysis - Nanoscale: Toronto Target is excited to nominate Toronto as their primary market but also the location for their first store opening and Headquarter. Toronto is economical sound, provides a high living standard shows cultural diversity and consists of an energetic, creative and dynamic social build-up. The city is the provincial capital of Ontario and also the biggest urban settlement within Canada accounting for an approximate population of $5 million people including the greater area (Wikipedia). Within the Corridor Ontario is the only Anglophone province providing a similar cultural and linguistic build –up to the U.S market. Toronto ranked 4th in the 2009 Economists livability ranking scoring 97.2% in livability and 16th in the 2010 Mercer quality of living. (The Economist, 2009, Mercer, 2010) Toronto is considered an alpha world or global city and was ranked 14th in the 2010 global cities index (Foreign policy, 2010) Toronto’s economy is well established accounting for 11% of Canada’s overall GDP (City of Toronto, 2011). We consider Toronto as a prime example for a North American city with the potential of consistent growth. Nevertheless, we understands that an economical sound market is more likely to attract an uncountable mass of competitors seeking for their relevant market share. How to overpower these competitors will be addressed in the following competitors analysis and brand identity rubric.

Competitors - SWOT - Analysis

Level 1

Level 2

Threatlevel

high

low Level 1 competitors provide similar product and service offerings, store format pricing etc. and compete for the same target market with Target.

Level 2 competitors are specialty merchandise stores (i.e. electronics, furniture, apparel stores etc.), which compete for market share with Target within their market segment.

Market] [Niche Target’s strongest differentiation to competitors remains in the areas of Home Essentials (furniture, tableware, bedding etc.) and trend forward apparel. The importance remains to intensify the importance of high quality and cutting edge design within both segments to increase market share against level 1 and 2 competitors.

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T

arget consumer

The Canadian Target consumer is 20-45 years old trendy, fashion-conscious, urban, highly educated and knowledgeable. Target will predominantly address mid-upper class women and men with an increased interest in art and design. The Target consumer values, well marketed, up-scale merchandise to a fair price point. The Target consumer is predominantly English and French speaking (primary market), highly mobile and uses means of public transportation and cars to transit. He or she values sustainability and is environmentally engaged. Our customer enjoys spending free time at public events such as concerts, art exhibitions and parade’s.

Primary target consumer

With an increasing Asian population we consider Chinese customers as significant portion of the target market. At the beginning specialized product offerings will aim to attract and satisfy the emerging consumer. Further changes will apply with increasing demand. If future prognoses become true than elderly consumer will become one of the leading consumer segments in Canada. Target will increase convenience, accessibility and plans on expanding their customer services to fulfill the needs of senior citizen’s.

Emerging consumers

Income level Canadians income and wages are on a steady rise; purchasing power parity (PPP) is close to U.S income levels Education Canadians lead the Organization for Economic Co-operation and Development OECD countries with the highest proportion of adults who posses a college or university degree.

Diversity More than half of Canada’s population is foreign born with Chinese marking the most dominant immigrant group.

Age Aging population with steady increase in 65+age bracket, expected generation shift with baby boomers entering retirement age.

Logo ///

I

We recommend continuing the use of the bullseye logo within the Canadian market. According to Target 96% of people recognize the bulls eye logo even surpassing the Apple logo and Nike swoosh. The logo is simplistic, universal, and represents the essence of the Target brand. We are confident that the Canadian consumer will quickly adapt to Target’s corporate red and white color scheme.

Both colors are part of Canada’s rich history and became the national colors in1921. As a consequence we will continue implementing both colors in the store environment but also for our product offerings, stationary and advertisements.

However, since red and white are such widely used colors we try to avoid an overexposure to the Canadian consumer. Our ultimate goal remains to keep the Canadian consumer excited about and enticed to the Target brand.

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Rotal Airforce

French Airforce

Royal Canadian Airforce

Harbourfront Centre Toronto

Logo similarities / The Lucky Strike /// Our research showed that the Target logo is an almost identical representation of the Royal Air Force (RAF), French Air Force (ALA) and Royal Canadian Air Force (RCAF) logo. Even color, stroke width and overall proportions are almost identical. Certainly, the air forces aren’t commercial brands and do not create a direct threat to the Target brand. Nevertheless, in Canada there is a strong association of Canadians with English and French history and it is assumed that Canadian consumers are very familiar and aware of the existence of these logos. Consequently, the logo potentially would give prospective customers the pre-notation of air force relations to a general merchandise store, which could implicate confusion Target stands for design, innovation, and creativity and therefore it would be highly recommended to consider a brand representation, which is truly unique to and representative of the Target brand. Considering the cost of an eventual brand change we would suggest a slower evolutionary brand changing process

Brand Identity / Kapferer prism ///

Physique: red & white Target logo, helvetica font, English bullterrier

Personality: young, creative, trendy, highly educated, upper middle class, price conscious, urban

Culture: American, progressive, customer centric, socially responsible & sensitive

Relationship: Tar-zhay the chic discounter [well-marketed products meet low prices]

Self-image: “Expect more pay less�

Reflection: trend leading, artsy, affordable, diverse

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Building site /// 4 2

Target acquired a site at the corner of Lakeshore Boulevard and Bay Street which is momentarily used as a paid-parking area. The site is in an excellent location and in immediate walking distance to major transit arteries such as the Gardiner Express Way, Lake Shore Boulevard, and Bay Street. Bay Street itself is a northsouth connector passing the University of Toronto intersecting the financial district and continues all the way to the Lake Ontario Waterfront. The transit arteries are expected to provide the necessary traffic flow by car. Pedestrians can reach the location through a wide range of public transportation means. Union Square Station which is the major inter-city rail station and a major commuter rail hub in Toronto serving up to 20.000 passengers a day is in immediate distance. Within a five-minute walking distance there are up to 10 public transportation stops or stations. The Maple Leaf Square is a new urban development featuring two high-rise towers, including a hotel, office and retail space, which is in immediate walking distance. Framing the site to the west is the Air Canada Centre home of the Toronto Maple Leafs, Toronto Raptor’s and Toronto Rock which is a prominent event center for thousands of sports enthusiast and host to a variety of concerts and shows. The neighborhood is also home to the CN Tower, which is the western hemisphere tallest freestanding structure that remains a popular tourist attraction. The Yonge-Dundas Square, a commercial public square also known as the Toronto’s Times Square is in less than 2 mile distance to the north. Wikipedia (2011) claims that approximately 56 million pedestrians cross Dundas Square every year.

To the west Chinatown is in immediate distance providing a predominantly Chinese market.

1

1 2

Bay Street

3

Air Canada Center

Gardiner Express Way

4

Bulls - eye Store

View from Air Canada Center towards the site [Nighttime]

View from Air Canada Center towards the site [Daytime]

View from South Bay Street towards the site [Daytime]

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Shelving distribution ///

Shelving system ///

Uniform distribution

1

Target uses a gondola shelving system to present the majority of their merchandise. The shelving system is double sided, universal and available in various heights and widths (36�-48�). The system consits of a starter unit , add-on units and end caps.

Filling maximum space with display shelving increasing the sales per sq/ft. gondola shelving on same height throughout the store. Arrangement makes it difficult to see the product offerings since

1

Incremental distribution

2

Uniform distribution low medium high

low

high

The new organization is based on a linear shelving grid. The play in heights adds excitement and dynamic to a normally monoton shopping environment.

Different shelving heights provide a better product exposure and make finding products more convenient and easy.Brand labels, packaging and discount areas can be spotted from distance since other shelves won’t obstruct the view anymore. Throughout the building the grid features low, medium and high display shelves. Display shelves can further transform into seating / lounge areas, play zones, and fitting rooms. The grid is modular and changes with type of merchandise.

The shelving changes in material and texture aswell.

The circulation arteries (aisles)

2

Incremental distribution

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