2015 does not seem to be favoring one of America’s renowned retailers, Target Corporation (TGT, Financial). Target’s rapid efforts to expand its business in Canada is not hidden from anyone. The pace at which the retailer was opening stores and moving ahead wasn’t taken well by several analysts and industry experts. Unfortunately the efforts didn’t pay off and now the retailer has been forced to pull down the shutter on its $5 billion worth Canada business. The liquidation process in expected to start in the next few weeks.
It’s not even been 2 years since the operations started and now Target will be closing all 133 stores and as a result more than 17,000 people will lose their jobs. Let’s look back at the recent past and try to understand the blunders that caused its run in Canada to come to an end.
Target loves Canada image.
#1. Target wasn’t enough focused on the target market and the requirements. The century-old retailer wanted to spread through Canada very quickly, its first foray outside the U.S., and to support the growth it continued to pour in money in retail outlets. But in all this it forgot to focus on what was most crucial – the needs of the customers. Target made the mistake of assuming that the customers in the U.S. and in Canada had similar requirements and preferences. In reality the audience was quite different and the deals and offers that were well received in America turned out to be a flop.
Retailers usher huge discounts during holiday season, such as Thanksgiving. Due to lack of interest or ignorance or over-confidence, Target didn’t put in the effort to know that Thanksgiving was celebrated early in Canada. Because of that retailers offer discounts during October in Canada. Target was the sole retailer to have not offered any discounts. This is just one example out of several other instances. Surely all this didn’t bode well with the Canadian buyers.
#2. Target went ahead blindly with expansion and capital expenditures, not turning back to see what and how much was actually required. This was Target’s first time outside the home country and the retailer thought it would function best if its reach was far and wide. A total of 133 stores and 3 distribution centers were opened in Canada in less than 2 years’ time, resulting in investment of millions of dollars. The idea was to run a business in Canada managed by Canadians, but the retailer did everything that lead established an American culture in its stores – something that the employees and well as the customers failed to understand. Canada in a huge country with a variety of culture and understanding the differences would have helped the retailer operate better.
#3. Target tarnished its brand image by keeping its shelves empty, charging higher prices, offering poor deals and providing poor customer experience. Though the company opened up stores everywhere, it failed to define an efficient and effective system that would support the stores with inventory. The supply-chain in Canada was a mess, to say the least. Most of the time the shelves were empty while the store-rooms were full of commodities. Again, the retail outlets and the distribution centers lacked proper communications to know what was in demand.
Target’s mode of operations required the shelves to be stacked with those items only that were decided to be on the shelves. Say it’s been decided that a particular shelf should display eggs and somehow there is a shortage in supply of that. On the other hand there is ample supply of say butter and jam. Normally a retailer would put the butter and the jam on display to make the shelves look full. But Target Canada chose to keep them empty, reserved for that particular item. To put it simply, it has too little of what was required and too much of what was unnecessary, as explained by a Target Canada veteran.
Apart from these there were several other factors that brought down Target Canada’s downfall. The scale of mismanagement of its operations outweighed Target’s intention to make its mark on the Canadian audience.
