As experts continue to dig into what exactly went wrong for Target Canada, one overlooked area could hold a big clue: Target couldn’t generate meaningful traction in its household “essentials” and grocery businesses.
In the majority of Target Canada stores resided about 10,000 square feet of space allocated to food sales, or about one-tenth of the average Canadian location. It’s a small but important corner of the store, experts say because it’s a driver of frequent and repeat visits.
Not surprisingly perhaps, apparel and home décor were Target’s strongest performing categories in Canada, both of which offered the kind of signature and exclusive brands Target’s well known for.
The most disappointing categories in terms of sales, according to experts at Desjardins, were “household essentials” — like beauty and personal care products, baby care and cleaning goods – as well as “food and pet supplies” – i.e. groceries.
MORE: Here’s who’s really winning Canada’s grocery wars
In the United States, household essentials and food and pet supplies account for half of Target’s sales.
Importantly those categories are big drivers of routine visits, something Target was unable to foster among many Canadian customers. Once in the door, shoppers in the U.S. often stopped to buy another item, too, increasing their overall spend.
But in Canada, the two categories combined to account for less than a third of storewide sales (32 per cent).
Discount grocers
“This reflects in our view the strength of the discount grocery competition in Canada,” investment experts at Desjardins said in a note Tuesday.
Banners like Loblaw’s No Frills, Metro’s Food Basics, Empire’s Price Chopper and FreshCo were direct competitors with Target for food and household product sales, experts say. And it appears they were successful in keeping customers coming back to them instead of incorporating the U.S. discounter into their weekly shopping habits.
Desjardins experts said Target’s own private label brand food brands failed to stand out in a crowded market where Canadians were already well familiar with the store brands at supermarkets.
And like the rest of the store, Target’s grocery sections suffered from “out-of-stock” issues as well, Desjardins said, “discouraging trips for frequency items.”
WATCH: Experts say it won’t take long for other retailers to snap up prime Target locations. Doug Vaessen reports.
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