Target Versus Wal-Mart in Canada!
By Sheldon Barry Cwinn.
Well it has finally happened....
Target has officially opened their first three stores in Canada, an event eagerly anticipated and planned for not so much by Target but by Wal-Mart! In one of the greatest turf wars in Canadian retail history, Wal-Mart has positioned itself in a very advantageous position to win the battle of the discount retailers. In fact, Wal-Mart hasn't gone on the defensive, but rather Wal-Mart's strategy was to create a new offensive.
Let's see how Wal-Mart plans to use the arrival of Target in Canada as a means to greatly increase its own sales, and why Wal-Mart will win the ensuing battle of the discount retailers.
Strategy # 1 - Big box versus Small Box
In order to beat Target, Wal-Mart needed to expand quickly. Furthermore, Target's strategy was to purchase Zeller's locations with locations mostly in shopping centers, and not stand-alone stores. This was exactly contrary to Wal-Mart's philosophy. Wal-Mart traditionally opens large Super Centers and in the United States has turned many of its Base Stores into Super Centers. Wisely, Wal-Mart recognized that this just wouldn't work against Target.
So what did Wal-Mart do? They created a new type of store which can be dubbed " the mini store". A regular Wal-Mart store (Base Store) has between 90,000 and 150,000 square feet. They usually required construction of self-contained buildings requiring the purchase of real estate and complicated construction. In fact, you will rarely find a Wal-Mart store in a shopping mall.
Mini Stores are stores that are well-suited to shopping centers. They are typically between 60,000 - 75,000 square feet. Mini Stores were fast to setup, with less risk and less investment. They could be implemented quickly and they could easily fit into failing strip malls that had plenty of cheap retail space, and secondary shopping malls that were in decline. Best of all, they could not only be set up in a manner that would increase Wal-Mart's retail footprint, but they could also easily be set up in the general proximity of a Target store. And, that is exactly what is happening. Almost everywhere there is a new Target store opening, there is a spanking new Wal-Mart store in close proximity.
Strategy #2 - Purchase the Zeller's Stores Target didn't want!
If target didn't want certain Zeller's stores why would Wal-Mart want them??
Target selected its Zeller's lease holdings very carefully. But their selection was more based on the store's location. Target is in startup mode. So it needed stores in most major cities, and then a store in the east, west, north, and south of the city. Their strategy is not to saturate the retail landscape in any given geographic area, but rather to plant their feet there.
On the other hand, Wal-Mart is using a strategy of saturation. The Zeller's stores that it occupied all had established shopping patterns that Wal-Mart could take advantage of. Better still Zeller's stores were typically around 75,000 square feet, which is perfect for the Mini Store concept. Even better Wal-Mart could occupy the Zeller's locations and convert them into Wal-Marts very quickly. And that is just what has happened! Wal-Mart has expanded its retail locations by about 33% before Target ever got out of the gate!
Strategy #3 - The battle of the Private Lable
A decision that Target made in its entry to Canada was to import its private label merchandise from the United States. And why not? Target has a reputation for quality. It uses a higher price point than Wal-Mart to offer what some consider superior quality. To the consumer its a value equation of price versus quality. In the United States Target often will win that value equation. In Canada however this will translate into merchandise that is imported from the United States. The costs to the consumer will be much higher than they would be State-side. No doubt Target will not win the value equation as often.
Now look at the new Wal-Mart stores. They all have "George" signage in the front of the building alongside the Wal-Mart sign. Wal-Mart has invested lots of money developing George as a Canadian brand and it is time for Wal-Mart to cash in on this brand equity. Also, Wal-Mart has greatly improved the quality throughout the George product line without a major increase in prices. In fact, this can be attributed to the growth in the number of stores - you get more economies of scale from having close to 400 stores in 2013 than having 350 in 2012!
Conclusion
With the arrival of Target in Canada, Wal-Mart has proven why it is the world's largest company. It has shown excellent agility and used the impetus of Target's opening in this country as an incentive to grow its own business dramatically. In fact it has reinvented itself to not only combat its arch rival but to prosper by it.
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