The Target effect: Cross-border travel declines in Canada

The Target effect: Cross-border travel declines in Canada

Target's entry into Canada is helping to create a shift in Canadians' cross-border shopping habits, new data shows.

Same-day car trips to the U.S. have fallen a total of 6 per cent in March and April, according to data from Statistics Canada. It's a trend that coincides with the discount retailer's aggressive foray into Canada, starting in early March.

StatsCan said Wednesday that same-day car trips to the U.S. fell 4.7 per cent in April, to 2.7 million trips, compared to a month earlier. In March, the rate was down 1.3 per cent from February.

While higher gas prices and a weaker loonie are partly behind Canadians’ reluctance to drive south or the border this spring, economists says there’s no question the so called "Target effect" is having an impact.

“The Target factor is there and I think it is just the beginning,” says CIBC deputy chief economist Benjamin Tal.

Same-day car trips by Canadians to the U.S had been on the increase, including rising for four straight months between November and February, after the government loosened duty-free rules last summer that allowed Canadians to spend more on short trips to the U.S.

Target makes a splash in Canada

U.S.-based Target opened its first three stores in Ontario on March 5 with great fanfare, including a splashy advertising campaign featuring its red-and-white logo. More stores have been popping up across Ontario and Western Canada in recent weeks. Target plans to open about 125 stores across Canada this year, largely in former Zellers locations.

Target’s entrance into Canada is altering the retail landscape, as it competes with other big-brands such as Wal-Mart Canada, Costco, Canadian Tire and Loblaw’s.

That changing scene is behind Sobeys Inc.’s announcement last week that it was buying Safeway's Canadian assets to better compete in the increasingly competitive grocery retail sector. CIBC analyst Perry Caicco forecasts this is the first step in the consolidation of the Canadian grocery business.

While Canadians are travelling less to the U.S. to shop, their international travels aren’t abating. StatsCan says Canadian travel to overseas countries rose 2.7 per cent in April, compared to a month earlier.

Meantime, fewer Americans are making the trip to Canada. StatsCan says U.S. residents took 1.6 million trips to Canada in April, down 4 per cent versus March.