In Canada, loyalty a good aim for Target’s bullseye

It looks like Canada is not only going to bring home the bacon for Target Corp., but chances are it will deliver some loyalty, as well.

The Minneapolis-based mass merchant recently estimated that its pending expansion into the north will generate $6 billion in sales by 2017. Those receipts will be generated at 100 to 150 stores, many of which are projected to open in 2013.

Among the unspoken growth opportunities for Target in Canada is its loyalty rewards program, called REDcard, launched nationally in the U.S. last October. Target recently said that shoppers who hold the card, which rewards 5 percent discounts, spend an average of 44 percent more than those who do not, according to the St. Paul Pioneer Press.

It will be interesting to see how those numbers translate among Canadians, who are traditionally more likely to be involved in loyalty plans than their U.S. counterparts. More than 80 percent of Canadians consumers are estimated to be enrolled in such programs, according to COLLOQUY, a global provider of loyalty publications, education and research.

But there is one major difference in Canada. There, consumers are accustomed to coalition loyalty programs – partnerships that can include dozens of retailers, service providers and other merchants that reward and accept points as a group. In other words, one loyalty card can accumulate points or miles at a variety of locations, from supermarkets to hotel chains, which can then be redeemed at any of the program participants.

So the big question is whether Target will join the coalition model or stick to itself. Coalitions do, after all, offer many benefits – chief among them that they reduce overall expenses for plan participants while exposing them to a greater number of members. Consumers, meanwhile, earn a single currency of rewards from the program’s many merchants, which in turn offer hundreds of redemption options. Rewards earned at a gas station, for instance, can be redeemed at Target.

Target’s expansion into Canada was announced in January when the retailer entered into a $1.8 billion agreement to purchase the leases of up to 220 sites from Canadian discounter Zellers Inc. It is Target’s first expansion outside of the U.S.