04/12/2012 03:35 EDT | Updated 06/12/2012 05:12 EDT

Target Canada Arrival Prompts Walmart To Slash Prices Further

TORONTO - More products for $1 are coming to Walmart Canada as the retailer takes on dollar stores, Target and the country's biggest grocers in a strategy to win a larger share of the domestic retail market.

Executives from the company met with analysts and the media in Toronto on Thursday to discuss its answer to the entry of U.S. rival Target and an expansion by Canadian dollar store operator Dollarama Inc. (TSX:DOL).

The plan includes lowering the prices of more items to about a loonie, said Shelley Broader, the retail giant's Canadian president and CEO.

"That's in direct reaction to what our customers need and want, but it happens to be a nice method of competing against the dollar stores," she said.

"The idea of getting most, if not all, of your needs met in one spot becomes incredibly important."

Walmart's supercentres aim to do exactly that, offering customers deals on everything from dish towels to dry cleaning services. The price reductions are part of a strategy of "cementing ourselves in the minds and hearts of Canadians as one-stop shopping," said Broader.

Solidifying that stance is particularly crucial right now because so many other retailers are fighting for the same consumer market that Walmart has practically had dominance over for several years.

Dollarama has been encroaching on the discount retailer low-priced territory in recent months, expanding its products beyond small items worth a loonie.

The Montreal-based dollar store chain said Wednesday that during the fourth quarter about half its sales of everyday consumer products, general merchandise and seasonal items were sold for between $1.25 and $2, up from 42 per cent last year.

Dollarama also aims to add up to 60 new stores this year, primarily in Ontario and Western Canada, in the face of growing competition from U.S. discount rival Dollar Tree.

Walmart is also rolling out a Canadian store expansion in advance of Target's arrival in early next year. This year, Walmart plans to spend more than $750 million to open, relocate or remodel 73 retail stores, including former Zellers locations.

The retailer has never competed against Target Corp. (NYSE:TGT) outside its home base in the United States, which means Canadians could react to the new entrant in ways Walmart hasn't anticipated. But the company is confident that it is prepared, Broader said.

"We have a tremendous amount of consumer research and we understand the nuances and the details of what customers are purchasing today," she said.

Target's Canadian debut has been one of the hottest stories on the domestic retail scene since early 2011 when it first made the announcement.

Canadian supermarket chains like Loblaws (TSX:L), Metro (TSX:MRU) and Sobey's (TSX:EMP.A) are in the crosshairs of both Walmart and Target, who are looking for ways to convince shoppers to spend more money in their giant stores.

Walmart plans an aggressive expansion of its food business, adding the feature to existing stores that don't already have it.

The company says over the past two years it has nearly doubled its share of the grocery market. It's confident that the momentum of its growth will continue, partly because at this point only 50 per cent of Walmart's Canadian stores have fresh food items.

Broader said Walmart wants to put a selection of fresh food items in "every store we can fit it in."