THE BLOG
10/17/2011 01:51 pm ET Updated Dec 17, 2011

Target, Wal-Mart Divide Up Canadian Spoils

THUNDER BAY, ONTARIO -- This week, I received an urgent email plea from residents in Thunder Bay, Ontario concerned about the logo saturation of their community by Wal-Mart and Target.

"As you may be aware," the Thunder Bay residents wrote, "Canada's Hudson's Bay Company sold the leases to some of its Zellers stores. There were three Zellers stores in our town, two of which had been sold to Wal-Mart. We already saw the drop in sales at other stores when the first Wal-Mart opened and when they renovated it to became a "super Wal-Mart." Many of our local grocers are feeling the pinch from a decline in sales. We as a city are struggling to keep some sense of identity and beautify our downtown core -- but this cannot happen if our dollars are usurped by a faceless corporation. Please help, our local economy is suffering and morale is low, but if we see some hope, we will fight for what's right."

Roughly three weeks ago, Target put out a press release indicating that it had finalized its real estate transaction with Zellers. Minneapolis-based Target took over a total of 189 leases from Zellers. Target said the "vast majority" of these stores would carry the Target brand, but the remaining leases would be sold "to other Canadian retailers."

This Target takeover was first revealed in January of 2011. Target had no intention of using all the stores it had assumed. Six months after the purchase was announced, Target transferred the leasehold rights for 39 stores to its main competitor -- Wal-Mart Canada.

All this retail musical chairs was presented to the Canadian media as a form of massive job creation. The Toronto Star ran a story just before Labor Day indicating that Target planned to hire "tens of thousands" of Canadians, including 150 to 200 employees per store. Target estimated that each store would employ 50% more workers than the Zellers' stores it was replacing. Target promised in its press release that it would "engage with Zeller's associates to make it easy for them to apply for jobs at Target." But according to The Star, "Zellers employees will be given the same consideration as other job applicants."

On the same day that Target announced its final agreement with Zellers, Wal-Mart put out a press release of its own, which began: "Today Wal-Mart Canada announced that it has completed the acquisition from Target Canada of leases for 39 store locations currently occupied by Zellers." Wal-Mart estimated that its takeover of 39 stores would "create more than 5,000 construction, trade and store jobs." Wal-Mart boasted that it "accounts for more than half of the retail growth in Canada."

According to the Thunder Bay News Watch, employees at the two Zellers store in that city have been told they have another nine months of employment left before their stores close and are taken over by Wal-Mart. Each of these Zellers stores has about 100 employees. So the Target/Wal-Mart takeover of 189 stores means approximately 18,900 workers will have to line up for jobs at the American-based retailers that helped to destroy Zellers.

It's not clear yet how Canadian shoppers will respond to the saturation of these two American-based retailers. But they certainly should not expect the Canadian economy to see "tens of thousands" of new jobs. In 2007, CIBC World Markets released a 14 page report called Wal-Mart's Canadian Supercenters: Trade Area Damage. The study looked at the Scarborough, Ontario trade area one year after a Wal-Mart supercenter opened there. According to CIBC, Wal-Mart's $18.2 million in sales came mostly from two sources: $5.2 million from a Wal-Mart discount store that the company shut down when the supercenter opened, and $10.4 million when a Price Chopper grocery store closed. "Most of the sales come from local chain competitors," the analysis said. 94% of the Wal-Mart supercenter sales came from either its own closed Wal-Mart (29%) or other grocery competitors (65%). $17.1 million in Wal-Mart grocery sales came from other cash registers. "It's no secret that Wal-Mart will have a huge impact on the Canadian grocery business," the report concluded.

Wal-Mart claims that "nine out of ten Canadians shop at Wal-Mart Canada." The cannibalization of Zellers stores, and the resulting dislocation of thousands of Canadian workers, undercuts claims by Target and Wal-Mart that "tens of thousands" jobs are being created by this American takeover.

As one reader of the Thunder Bay News Watch commented: "When Wal-Mart bought out Woolco it was in the agreement that they would take on the former employees of the stores. Not in this case. Just the leases were purchased and no concern from Hudson's Bay Company or Target about all the employees they are about to put out of work. Yes they have offered resumé and job re-training services to help them find other jobs -- but no guarantee that they all will. So what is wrong with fighting and trying to organize and bring in a union? They got nothing else to lose now do they?"

The Zellers collapse in Canada should remind Americans once again that when giant retail chain stores come to town, they represent a form of economic displacement, not economic development. The Wal-Mart and Target takeover of Zellers stores amounts to little more financially than running in place -- which as a growth strategy will take the Canadian economy nowhere.

We are told that the American economy is driven by consumer spending. But so much of that spending results in cannibalization within the retail market, it is no wonder that our future as a nation of baggers and stockers is a dismal prospect to contemplate.

Al Norman is the founder of Sprawl-Busters, and has been helping citizen activists fight big box stores for the past 18 years. His most recent book is The Case Against Wal-Mart.