Target In Canada: Brand Comes North -- At Higher Prices?

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UPDATE: About a dozen shoppers lined up in cold, clear early-morning weather in Guelph, Ont., to be among the first to browse the aisles of a Canadian Target store Tuesday.

But shortly before the scheduled opening, the number of visitors to the Guelph store suddenly grew to more than 100 people, who quickly got in at 8 a.m.

The U.S. retailer opened in Guelph and two other nearby Ontario communities west of Toronto — Milton and Fergus — to serve as testing grounds for a phased rollout of the brand across much of the country later this year.

Another 21 stores will open this month throughout Ontario, although dates haven't been announced.

Overall, the company is expected to open between 125 and 135 locations in Canada.

After the Ontario rollout, Target will begin moving into western provinces throughout the year and eventually into Quebec.

None of those opening dates have been announced.

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TORONTO - The long-awaited arrival of U.S. discount giant Target means Canadians can now get their hands on the famed bull's-eye brand's wares without crossing the border — though the savings here might not match those down south.

The retail chain, which opened its doors Tuesday in three communities west of Toronto, has said Canadian customers will likely see a difference in pricing compared to items carried in its U.S. stores, with the company focused on being "competitively priced'' with retailers in Canada.

A spokeswoman for Target Canada couldn't say exactly how that will play out on shelves in the newly launched Ontario stores in Guelph, Fergus and Milton or the dozens more locations the company expects to open in former Zellers stores across the country.

Pricing depends on a number of factors and it's difficult to give case-by-case examples or even narrow it down to categories of products more likely to warrant higher prices, Lisa Gibson said Tuesday.

"In certain cases, the prices will actually be completely on par with U.S. prices and in some cases there might be some differences, but ... our overall goal is to make sure we're competitive with the marketplace," she said, adding the company is also bringing in a five per cent reward program from the U.S.

At the Guelph store, a 2.95-litre bottle of Tide laundry detergent was priced at $15.99 Tuesday, compared with US$11.99 on Target's American website. The same product was listed for $15.99 on the Canadian Tire website.

A bottle of Aveeno moisturizer cost $7.49 at the Guelph store, while the lotion was marked down to US$5.99 on the U.S. website, down from the regular price of $6.29. On the Shoppers Drug Mart website, it was priced at $8.99.

The Canadian dollar was trading at 97.27 cents US Tuesday morning.

Brian Yarbrough, consumer and industrial analyst with Edward Jones, said the popular chain should manage to slightly undercut competitors on some items simply because none in Canada can rival its buying power.

But he said Target has no reason to match its U.S. prices if consumers are willing to pay more.

"I don't think they're really looking at 'OK, what are our prices in the U.S. and what are they going to be in Canada," he said.

"I think they're looking at it as 'OK, what is the standard price like amongst competitors in Canada and that's the range we need to be in, we don't need to worry about how we're priced in the States,'" he said.

It's a familiar phenomenon for Canadian shoppers, and one that has captured the attention of analysts and politicians in recent years as the dollar hovered near and sometimes surpassed parity.

Last month, a Senate committee urged the federal government to launch a comprehensive review of the country's tariff policy, one of several recommendations aimed at bridging the price gap with the U.S.

The report made it clear no one reason is responsible for the price differential, noting economies of scale, the bigger U.S. market, higher input costs and so-called country pricing — whereby manufacturers and suppliers charge Canadian retailers a higher price for brand-name items than U.S. counterparts — all play a role.

"Higher wages in Canada, transportation costs, obviously the cost associated with producing dual-language packaging, there's just a number of factors," Gibson said, adding the issue is "widely recognized" within the industry.

There's also little incentive for U.S. transplants such as Target (NYSE:TGT) to offer discounts in Canada that rival those south of the border, some experts said.

"In general, retailers price their products higher in Canada... because they can," said Ambarish Chandra, an assistant professor and expert on cross-border shopping at the University of Toronto's Joseph L. Rotman School of Management.

"There's generally less retail competition in Canada, so they can charge higher prices than in the U.S. where there's generally much more competition and prices are driven down much closer to their costs," he said.

It's possible some Canadians will continue crossing the border to take advantage of better discounts at U.S. Target locations, but the dollar's recent tumble below parity and rising fuel costs will keep many from making the trek once local outposts are within reach, he said.

Even so, the retail giant likely won't mind if some shoppers shun its Canadian stores in favour of the U.S. originals, Yarbrough said.

"Think about it, if more people come across the border and shop (at Target) in the States, they're benefiting either way," he said.

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