Sony, Target Closing Canada Stores

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TORONTO, Jan 16 – Sony Corp says it is closing all 14 of its retail stores in Canada as it refocuses its business. The Japanese electronics company yesterday said the closures will result in 90 layoffs. Spokesman Ved Khan says the stores will be closed over the next six to eight weeks.

Sony has been scaling back its business in Canada for the past year and has already shut several locations. The retailer currently has stores in Montreal, Ottawa, Quebec City, Vancouver, Toronto and Alberta. Sony said customers will still be able to purchase merchandise through third-party retailers and its website.

Target is also giving up on its money-losing foray into Canada after just two years, closing 133 stores and cutting loose more than 17,000 employees. Target said it didn’t see how it could stop losing money before at least 2021 on its first international expansion. The closing links Target with a series of other retailers who have learned the hard way that the northern border is tough to cross.

During a call with investors yesterday, chief executive officer Brian Cornell, who took the helm last August and has been charged with turning around the company, described the decision as “very tough.” What went wrong? Cracking the Canadian retail market, about one-tenth the size of the US and right next door, looks simple. Target’s difficulties show it’s not.

There are costly regulations. In addition, most Canadians live near the US border, compare prices religiously and are willing to shop in the US to save money. There’s also increasing competition. Canadian standbys like Dollarama and Canadian Tire are formidable rivals. And Wal-Mart Stores Inc, already the biggest retailer in Canada, cut prices to fend off Target.

Other retailers have had similar problems in Canada. Big Lots Inc and Best Buy Co have closed stores there and Wal-Mart has seen its sales in Canada weaken. Sears Holding Corp is selling most of its stake in its Canadian unit. The well-publicised woes of Target have made Nordstrom take a conservative approach to Canadian expansion.

The upscale chain opened its first store last September and plans to have a total of six by 2017. Only a few years ago, exporting Target’s “cheap chic” seemed like a no-brainer because droves of Canadians crossed the border to shop at its US stores. But problems cropped up almost immediately when it opened more than 100 stores in the first year of its Canadian expansion.

Shoppers complained of shortages of basic goods and complained that prices were too high. They also didn’t find the brands that they’d seen and liked in US stores. As a result, Target racked up losses as high as a billion dollars a year. “We missed the mark from the beginning by taking on too much too fast,” Cornell said on the Target blog.

A weak holiday season at its Canadian stores was the last straw. To fix the Canadian business, Target told investors yesterday it would have to invest billions more. “Target underestimated that the Canadian consumer is a highly sophisticated consumer who cross-border shops,” said Antony Karabus, president of Hilco Retail Consulting in Toronto.

“It also underestimated the fiercely competitive landscape.” Canadian shoppers were more blunt in their assessment. “Shame on them for opening here with exorbitant prices compared to the US,” said Lauren Tinto, 35, of Toronto. “They think we’re idiots or something.”

Jeff Barr, a 63-year-old teacher from Thornhill, Ontario, said he wasn’t impressed on his visit to a Canadian Target after often shopping at Targets in the US. “The shelves were empty.” But employees were feeling the pain at a Target store just east of downtown Toronto.

“It’s so sad for us,” said Adelle Layon, a Target worker at the Canadian store. “We’ve been here since the start. We built these shelves. All of us here right now, helped to build it. “ Layon said she and her fellow workers heard the news from managers and after they went into the lunch room, they saw the news on TV. “No one is happy about it.”

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