The following entry is a record in the “Catalogue of Catastrophe” – a list of failed or troubled projects from around the world.
Target – Canada
Project type : Retail store opening
Project name : Unknown
Date : Jan 2015 Cost : In the region of $7B
Drawn by lower prices, it is common for Canadian families to cross over into the USA to grab their shopping. One favourite destination has always been the US retailer known as “Target”. Famous for their large red and white bulls eye logo, Target’s reputation for good choice, low prices and solid quality was a natural choice for Canadians wanting to stock up on household products, clothes or electronics. Having reached a point of maturity throughout the USA, Target started looking for international expansion opportunities and their relationship with Canadian households seemed like a logical path forward.
As an entry strategy Target purchased 189 leases from the ailing Canadian retailer Zellers. Zellers had sold similar products to Target, but had failed to attain consistent profits. Providing access to many of the major malls across Canada, the move cleared one of the major competitors from the market and avoided the need to build up a retail presence on a piecemeal basis. The move however also committed Target to going big and going big quickly. While some leases were sold on to other retailers, Target arrived in Canada with a bang. Opening their first store in March 2013, they rapidly expanded and reached a peak of 133 stores in little more than a year and half.
Excitement was high and so were expectations. Canadians were used to the low prices in the US stores and expected a similar experience in Canada. Unfortunately those expectations weren’t met. Prices were comparable with other local retailers and the “Target” name was not enough of a draw. When you’re selling commodity items as mundane as toothpaste, the brand on the box matters, the brand on the receipt does not. Compounding the problem was the fact Target Canada suffered from supply chain problems that meant empty shelves that should have been stuffed with key products. Those problems were reportedly linked to the development of a new supply chain software developed specifically to support Target’s expansion into Canada . Used to high stock levels and plenty of choice, today’s buyers don’t have much patience for a store that doesn’t have what they want when they want it.
The impact was immediate and financial performance was lacklustre at best. I personally visited a number of Target stores when Target first arrived and given the size of the stores the number of customers could only be described as sparse. Those problems persisted as the rapid expansion of stores progressed and continued reports in the Canadian media reflected the disappointment Canadian shoppers were feeling. Those reports likely helped keep other shoppers away and Target Canada’s financial results remained weak. Various promises to address the concerns were made, but none gained the traction needed to put the project on he road to success. On Jan 14th, 2015, Target Canada threw in the towel. With reports indicating that Target Canada may not have enough cash to make the next payroll Target Canada filed from bankruptcy. Total losses from their Canadian adventure are said to be in the order of $7B.
Note: In something of an ironic twist, Target’s own in-store marketing was telling the customers to expect more. “Expect more. Pay Less®” signs were prominently displayed throughout the store. It appears Canadians took the advice. They did expect more and they did pay less. Unfortunately the reason they did less paying was because they were doing less buying. Given the stories in the media concerning Target’s price practices in Canada versus the USA, perhaps an alternate marketing slogan may have been more appropriate for the Canadian market.
Contributing factors as reported in the press:
Failure to live up to customer expectations (Canadian pricing did not match lower US pricing). Lack of situational awareness / lack of stakeholder analysis (failure to fully understand Canadian retail sector). Quality related issues (failure to establish a reliable supply chain when first opening). Lack of risk management (the expansion was very rapid and appears to be based on the assumption that the openings would be successful).
Other related projects :
- J.C. Penny – J.C. Penny also failed to use risk management practices when changing their key strategic direction back in 2012.
Reference links :
- Target’s launch into Canada ‘a multifaceted failure’
- Timeline of Canada Targets rise and fall
- Top 5 reasons why Target Canada was an epic failure
- Billion-dollar mistake: How inferior IT killed Target Canada
- Target Canada was running out of cash
- Bankruptcy filing court documents
“Expect more. Pay Less” is a registered trade mark of Target Brands, Inc., Minneapolis, MN