Target Canada's pricing strategy
Photo credit - Target Canada
Target's recent Canadian launch has garnered significant media exposure from a variety of angles. The primary focus from a consumer perspective, particularly those familiar with the brand, was whether the pricing would be on par with the US stores. A BMO study last year indicated that in general, retail prices are 14% higher in Canada, due to higher transport and distribution costs, combined with higher cost of goods which is largely attributed to smaller scale. Tony Fisher, Target Canada's president, clarified at a Canadian Club of Toronto luncheon, "we want to come in and compete with the retail landscape here". Target will price their product to compete with retailers such as Walmart, Canadian Tire, and Loblaws.
To that end, Kantar Retail visited competing Walmart and Target stores and compared a basket of 29 national brand products, and found virtually no difference between the basket totals ($124.02 Walmart, $124.23 Target). To ease any consumer concern, Target has implemented a price-match guarantee. This is seen as attractive to families with children, the exact market in which Target aims to attract.
We want to drive home our focus on pricing and design and our focus on community.
Target has also added their weekly flyer into the mix, which will drive traffic into stores with gift card offers on selected products, promotions on exclusive product, and weekly specials. A BrandSpark International survey found that 75 percent of Canadians look at weekly grocery flyers, in contrast with 60 percent of Americans. "We are well aware that the flyer is an important tool for how Canadians shop, we want to drive home our focus on pricing and design and our focus on community", said Lisa Gibson, a spokesperson for Target Canada. The flyer is seen as a "gateway" promotional tool which drives traffic: when a staple item in a household is placed on promotion, it triggers the customer to enter the store where they see other items of interest, which results in multiple purchases.
Target also has one of the best loyalty cards from a consumer perspective. The Target Red Card offers a blanket 5% discount at the checkout counter. Some 30,000 Canadians held a Red Card with Target US prior to store opening. Canadian consumers are hungry for the new retail experiences, and Target's assortment of merchandise, unique designer collaborations, and great pricing, may be the offer with which Target will gain market share - and perhaps even drive growth in the discount general merchandise category.