Walmart’s plan to battle Target, Dollarama in Canada
Thu Apr 12 2012
The new urban-concept Walmart in Scarborough still smells like fresh lumber.
It opened in January, a model of the future of Walmart in urban Canada, built on half the 10-15 acres of land required for a typical supercentre.
The seasonal toys and gifts – in April that means skipping ropes and sidewalk chalk – are to the right of the entrance as they are in older, bigger Walmarts.
Unlike older Walmarts, where groceries seem like an afterthought if there are any groceries at all, the fresh produce and groceries at the new store on Eglinton Ave. East near the Go station are front-and-centre.
And they’re cheap: Field tomatoes for $1.70 a kilo, small cantaloupes for $1.27, white P.E.I. potatoes at $3.97 for 4.5 kilos. In the grocery aisles behind the produce, a 750 ml bottle of S. Pellegrino sparkling water goes for $1.25 and a 1.75-litre bottle of Tropicana orange juice is $4.67.
Look out grocery stores, look out Target, look out Dollarama: Walmart is expanding by 4.6-million square feet in Canada in 2012, increasing the number of stores from 333 to 380, and renovating existing locations to offer new products.
The so-called “Urban 90,” store in Scarborough, which covers 90,000 feet, is the first of its kind, but more will follow in dense urban markets like Vancouver, where there is limited room for new builds.
Older stores will be renovated, including the 39 Zeller’s locations Walmart purchased from discount retailer Target after Target bought 189 leaseholds for Zellers store locations from the Hudson’s Bay Company.
Walmart will spend $750-million in Canada and create as many as 15,000 jobs in construction and retail, about 5,000 of them permanent, according to Shelley Broader, CEO of Walmart Canada.
Broader and David Cheesewright, president and CEO of Walmart Europe, Middle East and Africa (EMEA), addressed journalists at an international conference for the investment community on Thursday in Toronto. They focused on Walmart’s plans for expansion overseas and in Canada.
To compete with Dollarama, which plans to open 50 new stores in Canada in 2012, Walmart will stock more dollar items including six plastic tumblers for $1 or a set of plastic measuring cups for $1.
To compete with Target, which plans to enter Canada in 2013, Walmart is offering a new line of cheap-and-cheerful housewares in bold colours: Rice bowls for $2 and dinner plates for $2.50. To compete with grocery stores, more Walmart stores in Canada will sell groceries. Only half the Walmart locations in Canada currently do.
“We’re competitive. We like growth,” said Cheesewright, in charge of developing stores in Africa. There are 330 Walmarts in Africa, 90 per cent of them in South Africa. There are Walmarts in Nigeria and Namibia.
But Canada is one of Walmart’s more profitable investments.
Investors should be wary of Walmart’s ability to generate profits outside of the North America, warns John Marshall, senior capital markets economist with the United Food and Commercial Worker’s Union, with 250,000 members in Canada
Walmart has not been able to generate the same kind of profitably overseas that it enjoys at home. Marshall also said the number of jobs Walmart likes to trumpet in advance of building are typically inflated.
“They make bold statements about the number of jobs, positions, levels of pay and benefits. Invariably those numbers turn out to be large overestimates,” he said.
Maureen Atkinson, retail consultant for the J.C. Williams Group, said Walmart is doing the right thing by mounting a powerful offence in advance of Target’s arrival.
In the U.S., Walmart was able to gain grocery share by putting smaller, regional retailers out of business. The grocery market in Canada is dominated by large chains that will be harder to compete with, said Atkinson.
And while Walmart has shown it can be innovative, there’s a limit to how much it can change.
“They are general merchandisers. They can play with store formats, but beyond that, they can’t really change who they are,” said Atkinson.
“They’ve tried to emulate what Target has done in the U.S.…but they’re just not fashion. Their whole system is set up to get things out, not romance the product, so to speak.”
Note: This article has been edited from a previous version that incorrectly said that Target had purchased the Zellers chain from HBC. In fact, Target purchased 189 leaseholds for Zellers store locations.