We might be tired of all the post-mortem comments on the demise of US retailer Target in Canada, yet isn’t this a good opportunity to learn about the marketing, economic, and competitive challenges everyone in business faces?
These same issues are likely confronting many Canadian companies so we might want to learn as much as possible about Target’s failure.
The Perfect Storm for Retail Disaster
Target, the very successful US chain pulled out after two short years in the Canadian market. Its US parent will take $5 billion loss on the venture.
Each expert and retail guru that commented on Target’s exit, revealed factor after factor. Like Target, they focus more on the non-consumer side of the equation. In the end, they concluded that the reason they failed was because there was no real market need for them in Canada. Is this because Target was only trying to be just another player in a crowded market?
“With the benefit of hindsight, looking back, we took on a little too much, much too fast,” Molly Snyder, spokeswoman for Target, told Retail Dive in an interview.
My personal impression was that their retail atmosphere was very good, but when I shopped there, I didn’t feel compelled to buy anything. A lack of advertising and promotion is the likely reason. Also as you can see from these pictures, there was nothing disruptive about the aisles. They appear to be very sterile and consistent and given how empty the stores are of customers, this approach didn’t work.
Target needed to enter the Canadian market ready for a counter attack from Costco, Walmart, Canadian Tire, Sears, The Bay, and even supermarkets such as Loblaws. Now, other American companies might hesitate to come here without an aggressive game plan.
Here are my Top 8 reasons Target failed in Canada:
- Too much, too soon. Laying out billions in capital to build/buy retail buildings meant they couldn’t advertise/promote the way they have to. Any company that doesn’t promote really well can’t expect to survive.
- Poor supply chain management. From missing eggs and milk to not carrying brands that were popular in their US stores, the empty shelves gave social media critics lots of fuel.
- Poor online presence – Their US ecommerce operation is doing very well, but they had little going here. The online realm is increasingly important — yet one more catch up project for them.
- Pricing and the fall of the Loonie. A big problem which raised their prices and ruined their brand pricing. They didn’t have the brand value that would allow them to overcome these issues.
- Alberta/Sask oil price fall. This seriously darkened the sales number for the now important prairie region with no end in sight.
- Got the media hype but then couldn’t deliver. They managed to make a lot of noise with big media, but then there stockouts and high prices fed internet trashing campaigns that spread bad PR.
- Target’s brand image had no weight in Canada at all. Target had no history in Canada and therefore needed time and money to build their brand image here. They had neither time nor money for an excellent Web, social and TV ad campaign.
- The retail stores (former Zellers and Bay stores) were in poor locations and not planned well. The interiors were a lot like Zellers but so clean that perhaps customers whizzed right through without wanting to buy anything.
What Have We Learned?
Experts believe there was no reason or purpose for Target to enter the Canadian market. They didn’t really bring anything new or differentiated to the Canadian retail scene, and they blew their budget on buildings. The fact the Canadian market has less active retail space isn’t a sufficient reason.
We should applaud a company’s willingness to grow and expand, but such billion dollar forays need to be well planned, and executed gradually in major centres. The lesson might be, don’t bite off more than you can chew and make sure your instore merchandising makes customers want to buy. The Canadian market has its own shopping culture, yet as you saw from the pictures above, any shopping experience needs to create a purchase action. Target didn’t create that desire to purchase.
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