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Whose prices are better? Target or Wal-Mart?

Exterior photos of the Target Canada in Guelph Ontario Monday, March 4, 2013.

Tim Fraser/The Globe and Mail

After an unprecedented 26-month buildup, Target Corp. is finally officially opening its first 24 stores in Canada – after a month of "soft openings" – and inevitably facing customer letdown.

Some of its prices are higher than those in the U.S., and some of its products have been out of stock amid high demand. Not all of its brands are new to this country: Cherokee clothing, for instance, was carried at Zellers stores, whose space it has taken over.

And while Target never promised the same prices as those in its U.S. stores – it said prices would be comparable to its low-cost competitor Wal-Mart Canada Corp. here – a survey commissioned for The Globe and Mail this week shows that Target prices are still more than 1-per-cent higher than Wal-Mart, on a basket of the same household and beauty products, and as much as 8-per-cent higher when one particular item is dropped.

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The gap puts pressure on Target executives to draw customers with an edgy offering of fashion and home decor styles while navigating the choppy waters of disillusionment with prices and product availability.

Some customers shopping Target this week noticed the steeper prices – and some empty shelves – although almost all interviewed liked the spacious, clean store and found staff to be friendly.

"I'm a cross-border shopper – and I'll go back to the States to shop," said Camilla Maszkowski, 49, who bought some lemon juice at the Target store at Square One Shopping Centre in Mississauga, but found a bottle of Advil too pricey. "Pricing in the States is better."

Carolina Baker, 42, has her eye on a Lego Ninjago set for her son's fifth birthday in June, but it costs $89.99 at Target here and $74.99 (U.S.) at the retailer south of the border, she said. She plans to ask her sister in Florida to buy one for her and bring it on her next visit here.

Target spokeswoman Lisa Gibson said it is committed to being "competitively priced in the market." The retailer shops more than 20,000 items weekly to compare and adjust its prices quickly, she said. It also has a price match guarantee and a rewards card that offers 5 per cent off almost everything.

The survey, by mobile research firm Field Agent Canada, found that 12 of 13 goods were 8-per-cent higher at Target. The 13th item was substantially lower at Target, which resulted in its prices, on average, being 1.16-per-cent higher.

Field Agent did the survey on Tuesday at Square One, where a Target opened last week and Wal-Mart runs a super centre.

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Still, Boston-based consultancy Kantar Retail said its price comparison in March showed virtually the same prices overall on a basket of 29 national brands at a Target and a Wal-Mart store in Canada.

"The retailers' baskets were very competitive," said Robin Sherk, director of retail insights at Kantar.

Last January, a Field Agent survey for The Globe on a basket of 16 goods at Wal-Mart in the U.S. and Wal-Mart Canada (the same products as this week but a few less because they weren't available at both retailers) found prices were almost 23-per-cent higher in Canada. But in the U.S., prices at Wal-Mart were just 0.5-per-cent lower than Target.

Target executives have said the prices are higher in Canada because of higher costs and tariffs and fewer economies of scale.

Still, shoppers this week weren't only disappointed with prices. Debbie White, 42, had come to Target because her 14-year-old daughter Emma wanted Maybelline "baby lips" lip balm, but the store was completely out of them except for one tube of a peach colour, which she didn't like. (A store employee said the items were being re-stocked on Thursday.)

Even so, Ms. White bought about $70 worth of goods, including a blouse and a hair-cutting kit.

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Ms. Gibson said Target is preparing for a rush of customers on Friday, trucking in goods to replenish shelves.

Wendy Liebmann, chief executive officer of WSL/Strategic Retail, said some Target customers could be disappointed because their expectations are so high, and the retailer's "soft opening" is aimed at preparing customers for Target.

"You learn as you go and you fix it fast."

Click here to download the Target vs. Wal-Mart price table as a csv file.

Editor's note: An earlier online version of this story left unclear Wendy Liebmann's reasoning about customer response to the retailer's rollout in Canada. This version has been revised.

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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