consumer goods

Target won't kill Canadian retail. It will save it

Target will revitalize sad-sack shopping plazas characterized by peeling paint and potholes in the empty parking lots.

Hundreds of shoppers queued along a Toronto city block for
the chance to grab a blouse or frock created by fashion designer Jason
Wu for Target on Feb. 23, 2012. (Photo: Arthur Mola)

We’re almost there: just six months to go before Target opens its first batch of Canadian stores. Excited? A lot of shoppers sure are. After years of schlepping to Buffalo, Detroit and Seattle to experience that irresistible combination of trendy styles and rock-bottom prices, Target disciples will finally be able to stock up on cheap Jason Wu and Isaac Mizrahi fashions without leaving home.

But while the shoppers are happy, one would imagine Canadian retailers are not. Target, after all, is yet another American retail goliath set on stealing away customers and market share. But there’s an upside: look a little closer, and it appears that Target’s invasion will not only be good for the Canadian shopper, but for our homegrown retailers as well.

Target is not just dipping a toe in the Canadian market. This will be the full cannonball. The massive corporation has launched a multi-billion-dollar strategy that will see it open 165 new stores starting this March. Most of the 125 stores opening in the next year will be located in former Zellers locations, and that’s where Target’s impact gets interesting.

Now I’ve always had a soft spot for Zellers. When I was a teen in my home town of Burlington, Ont., there was a Zellers plaza near my high school where several friends worked during the summers. I spent a lot of time wandering those garish fluorescent-lit red-bordered aisles, so I know all too well that while Zellers had the low prices, it had none of Target’s style. It seemed to me you’d only buy your clothes there if you couldn’t afford the Bay. So I’m not surprised retail analysts expect the new Target stores to boast something like four times the sales per square foot that Zellers had.

Canada is currently littered with sad-sack shopping plazas formerly anchored by Zellers. You can recognize them by the peeling paint and the potholes in the empty parking lots. But come this spring, those lots will once again be full, the cash registers will sing, the aisles will buzz with eager shoppers. I would imagine the other stores in those plazas are looking forward to this.

And in fact, the CEO of Canadian women’s clothing chain Reitmans says he’s eagerly anticipating Target’s arrival for just that reason. “We thank God for Walmart,” said Jeremy Reitman at a recent investor conference, noting that his stores benefited from the extra traffic Walmart drew when it came up north. When Target comes to town, he said, he expects to see a similar effect. Target could single-handedly save hundreds of malls and plazas that would otherwise slowly die (as the Zellers plaza near my high school in Burlington did—it was eventually razed and replaced by condos). And as Reitman points out, many of the Canadians who cross the border will now shop at home, which will mean millions in extra revenue for all Canadian retailers.

Target is hiring more than 30,000 workers in Canada, and the landlords that own the malls will be soon be able to charge higher rents, so it’s hard to see a downside. Target itself will win too, as it is expected to ring up $300 or more per square foot, compared to the U.S. average of $280.

It’s easy to feel nostalgic for Zellers’ glory days—the chain was with us for more than 80 years, and at one point, the lowest price was indeed the law. But Target didn’t kill Zellers; you and I did, when we decided to shop at Walmart instead. Now we’re seeing a new evolution in discount, and that’s exciting. Target isn’t going to destroy Canadian retail—if anything, it will help save it.