The new Target store is seen in Guelph, Ontario, March 4, 2013, on the eve of its opening. The American retail giant is set to open its first three Canadian pilot stores on March 5.
The new Target store is seen in Guelph, Ontario, March 4, 2013, on the eve of its opening. The American retail giant is set to open its first three Canadian pilot stores on March 5. Reuters/Geoff Robins

A new study by Boston-based consulting firm Kantar Retail has found that Target Canada could be finally winning the retail war over Walmart since lowering prices that actually beat some of its discount archrival.

Kantar Retail said it found that prices at Target Canada of 33 national brands in the grocery, health and beauty aisles were 3.9 percent cheaper than those at Wal-Mart Canada. It said the Target basket cost $158.65 compared to Walmart's $165.16. The study was conducted in August.

It was a far cry compared to the prices Target posted when it rolled out a flurry of new locations across Canada in 2013. "In our initial study the retailers' basket values were effectively even," Robin Sherk, director of retail insights at researcher Kantar Retail, said.

But while Target Canada may have led in the pricing competition, it still has much more to work on pricing perception.

Sherk warned Target Canada's tactics is a very limited strategy. He said that while lowering prices may drive up grocery sales and traffic, "I'm not sure it makes sense in terms of securing customers in the long run."

Target Canada, unfortunately, still "continues to struggle to shift pricing perception amongst Canadians, despite plentiful assurances of its 'unbeatable prices' in store."

Consumers have consistently complained prices at Target Canada were even higher that those at its U.S. stores. Moreover, its shelves are always depleted of stocks.

Alan Middleton, professor of marketing at York University's Schulich school of business, told Financial Post that Target Canada had always struggled with the perception of higher costs. "Not everybody can go across the border to shop, but a perception of higher prices has been one of their problems."

In August, Target Canada reported a drop of 11.4 per cent in second-quarter sales at established stores, while working on improving in-stock goods.

Formed in 2011, Target Canada Co is the Canadian subsidiary of US-based discount department store chain Target Corporation. It acquired the leaseholds of 189 locations operated by Hudson's Bay Company Zellers discount chain, with the intent to use 125 of these sites to open Target stores in 2013. Target opened its first Canadian stores in March 2013; these stores numbered 130 as of August 1, 2014.