Target’s third quarter earnings down after Canadian expansion

Published On November 22, 2013 | By Jake Wilson | Business

By Therese Jastrzebski

Target’s earnings dropped in the third quarter and the company is blaming their expansion into Canada for the drop in revenue.

Pricing is one of the issues that keeps the store from reaching the Canadian market, said Steve Bang, a business professor at Humber.

“Target came in and their pricing wasn’t very good at the beginning and didn’t really compete with the Walmart pricing,” Bang said.

Target's earnings are down, despite their hyped entrance in to the Canadian market this spring.

Target’s earnings are down, despite their hyped entrance in to the Canadian market this spring.

If people are looking to shop in the low end, they are looking for good prices and will go to Walmart and if they are looking to shop for high-end goods, they will visit malls, he said.

Target has different virtues than stores like Walmart and it’s going to take time for shoppers to appreciate them, said Michael Mulvey, an assistant professor of marketing at the Tefler School of Management at the University of Ottawa.

Target historically offers wider aisles, better lighting and a more pleasant shopping environment than other discount stores, said Mulvey.

“I think there could be an issue of expectations not being met by certain consumers and so they go to Target and they think that they’re going to get the best deal in the world and well it’s maybe not as low as they’ve seen it elsewhere,” he said.

Shoppers who have gone on cross border shopping trips to Target might expect the bargains that they find in the American stores, he said.

They might also be disappointed that the stores don’t look exactly like their American counter parts, Mulvey said.

Target has done a great job of refurbishing the old Zellers stores, but they’re still not the same as the custom built stores.

Canadians also have set shopping habits that dictate what stores they go to and it takes time for people to break out of these habits, Mulvey said.

In order to start attracting shoppers and raise revenue, Target will have to drop prices, said Bang.

“I’d say Target has made a big mistake either they’re going to have to change the price or their going to have to exit the market,” he said.

Once the dust settles from Targets entrance in to the market, Target supporters will continue to be loyal and Walmart shoppers will continue to love their shopping experience, said Mulvey.

“It’ll be interesting to see where the people in between end up,” said Mulvey.

 

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