The Retailer Price Wars Heat Up As Sears And Target Struggle

Tough times ahead for Sears and Target

It’s a tough time right now for major retailers in the Canadian marketplace. With consumers up their ears in debt, retailers are just trying to maintain the customers they already have. This has led to discounting price wars, which are great for deal savvy consumers – look for amazing holiday prices this season – but will ultimately prove damaging for the industry.

For example, last week U.S. retailer Target reported disappointing third quarter earnings, as its much-hyped Canadian expansion led to a nearly 50 per cent drop in net income.

And Target isn’t the only American retailer struggling north of the border – Sears Canada recently announced massive restructuring, including selling off four of its flagship locations and widespread layoffs.

Off Target: Canadians Consumers Disappointed By American Newcomer

The honeymoon is officially over. While there was a lot of excitement about Target opening its doors to Canadian consumers earlier this year, it has quickly dissipated and been replaced with disappointment. Target experienced problems right off the bat and struggled to manage its inventory, leading to widespread complaints of empty store shelves.

Consumers have had a few months to take in the “Target North” experience and the feedback isn’t flattering, to say the least. Target’s strategy of catering to local neighbourhoods seems to have backfired. Consumers looking for “low, low prices” were disappointed with prices significantly higher than its American counterpart. In fact, CBC Marketplace aired an episode this past Friday about how Canadians are paying a lot more than their American counterparts.

In the U.S., Target is a hotspot for teens looking to pick up trendy brands at discount prices – but in Canada, the product selection leaves something to be desired. It’s as if all Target did was take down the Zellers sign and slap up their own. While Target hasn’t been a complete failure here, it needs to refocus its strategy on what makes it a hit in the U.S., low prices and great product selection, if it hopes to eventually win Canadian consumers over.

Sears Falls on Tough Times

While Target attempts gain a foothold in the Canadian market, Sears Canada is struggling just to stay afloat. The retailers announced the layoffs of more than 800 employees on Tuesday, as it tries to cut costs and stay profitable.

Though it has long been a household name, Sears has struggled over the past decade to find its place in the Canadian retailer sector. Once an iconic brand known as a one-stop shop for everything from fashion to appliances, it has watched its market share shrink. The numbers don’t paint a pretty picture – Sears Canada’s revenue has fallen by more than $2 billion from $6.5 billion in 2002 to $4.3 billion in 2012. With the exit of former CEO Calvin McDonald, Sears Canada looks to have shifted its focus to leaning down the business, which unfortunately includes layoffs and selling store locations.

Despite denying rumors that Sears Canada is up for sale, it’s hard to see giving up a prime location like the Eaton Centre as a positive move. Similar to BlackBerry, Sears has its own turnaround specialist running the show – only time will tell if new CEO Douglas Campbell can turn around the business or if a sale of the business is in the not-so-distant future.

More Retail Competition For Sears And Target Next Year

With the holiday shopping season in full swing, look for plenty of deals this year. Not only will retailers be offering great discounts, keep your eyes open for promotions including price matching and less strict exchange policies. Even more competition is on the way next year – Hudson Bay has an exclusive deal with Saks, and chic American retailer Nordstorm has secured Sears Canada’s former location in the Eaton Centre. The bottom line is Canadians retailers need to be at the top of their game if they want to maintain their market share and win new customers over.

 

 

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