Target Canada: a moment in Canadian history

Target

Source, The Canadian Trade Commissioner Service: http://tradecommissioner.gc.ca/canadexport/155736.aspx?lang=eng

According to Yahoo Finance on the day that Target Canada announced that it was discontinuing its operations in Canada there was an approximate 14.5 million increase in volume of its share sales and the stock price rose 3.6%. As an investor this news was exciting. The company had invested $4.4 billion in order to attempt its over ambitious expansion in to Canada suffering $2 billion in losses before it decided to concede this northern territory to those who understood it best (Peterson 2015). Unfortunately, it also meant the Canadian economy would suffer a serious blow due to the sudden loss of jobs for 17,600 people (Malcolm and Horovitz, 2015).

Opening 124 stores in one year (Lindsey 2015) is not merely a daunting task but put simply it is an absurd and reckless idea. Without considerable forethought conceived by strategic masterminds such a venture is sure to fail. It is clear that Target’s overly aggressive push to cut away a portion of the market share in the Canadian retail space was doomed right from the start. This “go big or go home” approach left the retail giant at the mercy of a number of aspects that caused their Canadian dreams of grandeur to run astray. The typical approach of opening a few test stores was ignored by Target, this was noted well by Shaw, “That strategy skirted the path most retailers take in making their first international forays: opening a few test stores and tweaking them in response to consumer demand. If there is evidence of a good appetite, the company can open more.” It is clear that an approach that allowed for slower expansion would have allowed the retail behemoth to educate itself from its mistakes and mitigate the risk of those mistakes on a much more manageable level. To aid in this education process other retail giants like Walmart use properly configured ERP systems that span the diverse aspects of their organization collecting and analyzing data. With such information at their disposal through systems that intertwine between the customer experience, the inventory system, the supply chain, finance and workforce planning, proper strategic initiatives are developed, implemented and evaluated in a timely and controlled fashion.

It was not a lack of appetite from the Canadian consumer that led to the collapse of such a grand opportunity, rather it was a lack of planning, a rush to implement without the appropriate systems at full working capacity. Inventory and automated ordering systems left Target lying at the border like a wounded animal desperately trying to claw its way in to this unknown northern expanse of retail possibilities. This is captured by Shaw as well, “Target was using an entirely new set of systems, supply chain infrastructure and third-party logistics providers in Canada – that proved to be the retailer’s Achilles’ heel.” The resulting distribution nightmare was the reason that too often shelves were left bare and customers would leave dismayed and confused. Target would have likely seen a more profitable future had Target invested in a scalable SCM system and configured it appropriately or in similar fashion to that used by other retail establishments such as Walmart. This would have given Target ample data to analyze and ensure their inventory systems and their automated ordering systems worked interdependently with each other with seamless precision. They also would have recognized what items in inventory were not turning over quickly enough. Understanding what remains for too long in your inventory provides the means to determine how to discount the items for more rapid sales. Stale inventory affects the reputation of the brand, especially if the unwanted items are the only items left to adorn the shelving. Such a sight will only convince customers that they should not return. With such a tool at Target’s disposal and if Target launched their stores in a manner by which they could control the integration of each new store through controlled environments, it is possible Target may have had a fighting chance.

Target’s sloppy expansion into the great white north and its chaotic logistics were not its only failures, it also failed to present itself where a growing number of Canadians make their shopping decisions; online (Sorensen 2015). Instead of canvassing for new opportunities in a growing online market, for whatever reason, Target decided to purchase the leaseholds of the dismally performing Zellers stores. In my opinion the less than optimal locations of these Zellers stores played some significance to the demise of Zellers and HBC was lucky to find “some poor sucker” willing to take them off their balance sheet. The mixture of poor locations along with expensive brick and mortar distribution immediately diluted the potential for Target’s success. A more appropriate alternative would have been to invest in a CRM that could integrate online customer experiences and track customer preferences. This likely would have resulted in better decisions regarding the prices the market was willing to bare and shopping habits of those interested in Target’s wares. With this information I believe that Target would have opened fewer outlets in order to provide the shopping experience at the price that customers were expecting (Lindsey 2015).  Instead however Target will forever be known now as expressed in Supply Chain 24/7, “History will show this as being one of the greatest supply chain disasters in Canadian history.” (Wulfraat 2015).

 

References:

Yahoo! Finance. Retrieved March 12, 2018, from https://finance.yahoo.com/quote/TGT/history?period1=1388556000&period2=1422684000&interval=1d&filter=history&frequency=1d

Peterson, H. (2015). 5 reasons Target failed in Canada. Business Insider. Retrieved March 12, 2018, from http://www.businessinsider.com/why-target-canada-failed-2015-1

Malcolm, H., & Horovitz, B. (2015, January 15). Target to shutter all stores in Canada. USA Today. Retrieved March 12, 2018, from http://www.usatoday.com/story/money/2015/01/15/target-canada-retailing-liquidation/21798843/

Wulfraat, M. (2015, January 17). Supply chain miseries doom Target in Canada. Supply Chain 24/7. Retrieved March 12, 2018, from http://www.supplychain247.com/article/supply_chain_miseries_doom_target_in_canada

Lindsey, K. (2015, January 21). Why Target missed the bullseye in Canada. Retail Dive. Retrieved March 12, 2018, from https://www.retaildive.com/news/why-target-missed-the-bullseye-in-canada/354508/

Shaw, H. (2015, January 15). Target Corp’s spectacular Canada flop: A gold standard case study for what retailers shouldn’t do. Financial Post. Retrieved March 12, 2018, from http://business.financialpost.com/news/retail-marketing/target-corps-spectacular-canada-flop-a-gold-standard-case-study-for-what-retailers-shouldnt-do

Sorensen, C. (2015, January 15). Why Target missed its mark so badly. Maclean’s. Retrieved March 12, 2018 from http://www.macleans.ca/economy/business/why-target-missed-its-mark-so-badly/

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