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Target’s exit, realtor fees and Alberta’s recession: BUSINESS WEEK WRAP

The biggest news story of the week didn’t emerge until Thursday, when U.S. retailer Target announced that it was pulling the plug on it’s Canadian expansion less than two years after coming here.

The discount chain opened to much fanfare in March of 2013 with a handful of stores, growing to 133 today. But despite that growth, the chain never made any money, losing about $ 2 billion since opening. Undone by consumers upset over higher prices than they were used to in U.S. Targets, and distribution problems leading to empty shelves, Target CEO Brian Cornell finally ended the failed experiment. 

“After a thorough review of our Canadian performance and careful consideration of the implications of all options, we were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021,” Cornell said.

The impact of Target Canada’s closure can’t be underestimated. We’ll have more for you on our page on Saturday about what might happen to its 133 locations, but the implications for other retailers is huge. As Diane Brisebois, the president of the Retail Council of Canada told Amanda Lang this week, “When Target announced that it was coming into Canada, more of the experts and consultants were saying ‘oh my god that’s the end of Canadian retailing.’ In fact, ironically, Canadian retailers have done extremely well.”

Taking aim at realtor fees

Retail wasn’t the only sector being shaken up this week. As the CBC’s Sophia Harris reported, a number of companies have started up in recent years that are changing the business model for selling homes. Traditionally, realtors charge a fee of about five per cent of the price of a home when it changes hands — and that fee is usually split evenly between both realtors involved in the deal.

Target Exits Canada 20150115

Target’s decision to exit Canada dominated business headlines this week. (Colin Perkel/Canadian Press)

With the average Canadian home now costing more than $ 405,000, real estate commissions can be in excess of $ 20,000. That’s why companies like feeDuck and others are making it easier to sell your own home and pocket the commission.

Of course, the real estate industry isn’t taking this lying down. There are 100,000 real estate agents across the country, a figure that has grown by almost 30 per cent in Toronto alone in the past four years, according to the Canadian Real Estate Association. Like any industry, they aren’t welcoming a sea-change to their business model.

Lawyer Lawrence Dale, however, said the new services don’t go far enough, because they’re really just an auction house to comparison shop between realtors who will do the work for the lowest amount. “While those services are good, they’re really just a subtle evolution of the same.”  Anyone wishing to go it alone is still fighting an uphill battle, he said.

Debt loads tick higher

Rising home prices are impacting Canadians’ bottom lines even after they’ve paid the real estate fees. The Royal Bank reported this week that household credit increased by 4.5 per cent in December. It may not be surprising that Canadians would be spending a little more around the holidays.

But with oil prices giving everyone some relief at the gas pump (and making us all feel richer than we really are) there’s reason for concern, Laurie Campbell, the president of Credit Canada told Amanda Lang this week.

“It’s a bit of a false sense of security, when you see oil prices going down, more money in consumers pockets, they’re probably spending twice as much, thinking that they’re saving so much,” Campbell said. “And this is what really is frightening.”

Alberta ponders the ‘R’ word

Individual Canadians aren’t the only ones learning a tough lesson about living within their means. Governments across the country are getting a wake up call that they have been overly reliant on oil money, none moreso than Alberta.

The premier of Alberta warned the province’s finances could take a $ 10 billion hit this year. While Jim Prentice was quick to pour cold water on any use of the ‘R’ word, that shortfall could add up to a recession, the Conference Board of Canada says.

The lower prices go, the more you’re going to see withdrawal of investment in the Alberta economy, therefore the odds of a recession are going up,” the board’s economist Glenn Hodgson told the CBC this week.  “So I think it’s actually the most likely scenario now.”

Other stuff

Those were just a few of the stories we did this week that you might have missed. Be sure to check out our website often for more, and don’t forget to follow us on Twitter here to make sure you never miss anything. In the mean time, here’s a day by day list of some of our most popular content from the past seven days.






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