Is Zellers a ‘Target’ for takeover as U.S. stores enter Canadian market?

When news of several discount American chains expanding into Canada brewed through the fall, few stories considered where all of those Target, Kohl's and Marshalls stores were going to fit.

The answer, it turns out, can likely be found at your nearest Zellers.

A report from The Globe and Mail stated U.S. property entrepreneur Richard Baker, whose private equity firm NRDC  acquired Zellers parent Hudson's Bay Company in 2008, is eager to sell locations of the discount chain.

But the source for the story also cautioned the deal would be a complicated one.

While it might seem natural to flip all the unfashionable Zellers stores into the more glamorous Target, much like how 122 Woolco locations were acquired by Walmart in 1994, the transition would not be quite so seamless.

Nonetheless, retail watchers don't think the 276 Zellers stores would survive the competition, anyhow.

Not only has Target confirmed plans to enter the Canadian market along with rival store Kohl's, the clothing chain Marshalls confirmed it will open first six stores north of the border later this year with hopes for around 90 more.

Zellers, founded in 1931 after Waterloo, Ont.-born founder Walter P. Zeller purchased the 14 Canadian locations of five-and-dime store Schulte-United, merged with the Bay in 1978.

Later, the name was planted on locations acquired from Quebec-based Bonimart and its English Canadian equivalent Towers, and the bankrupt B.C. chain Woodward's.

Despite its prominent national presence, Zellers has not been able to shake its second-rate status since the invasion of Walmart in 1994.

"Because the Lowest Price is the Law!" was played up as its slogan, along with other nationalistic positioning statements and the pioneering "Club Z" reward program, the brand arguably hasn't benefitted much amid ownership changes at HBC.

Recently, the stores have followed Walmart into the grocery business, by incorporating their own Neighbourhood Market.

Promises of low prices and one-stop convenience can't give Zellers the trendy cachet of Target, however. And the more assertive image of Kohl's could appeal to more Canadians in the 21st century than a chain once identified by a bear mascot named "Zeddy."

Now, it seems only a matter of time before the stores change hands to retail brands more accustomed to pronouncing the letter as "zee."

Watch the "Introducing Club Z" commercial from 1986 below:

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