A store that excels in the U.S. closes doors here
As the infamous red ring logo of Target captured the eyes of on-looking bystanders across 133 locations in Canada, nothing but optimism and satisfaction should have been on the rise. On the contrary, after only two disappointing years, Target has pulled the plug on its Canadian expansion with detrimental financial effects.
According to experts from Fortune magazine (Phil Wahba), The Globe and Mail (Tamsin McMahon), Wall Street Journal (Paul Ziobro, Rita Trichur) and Business Insider (Hayley Peterson), these are the five major reasons for Target’s failed expansion in the North:
Target is closing their doors in Canada – read on to see why this author thinks they failed in Canada.
Empty shelves
Target’s failure-to-launch was mostly due to their problems with stock and distribution. The overambitious opening of 124 stores in 10 months proved to be far too straining on the company when disappointed Canadian customers expecting the same products they saw across the border left empty-handed as those products were nowhere to be seen. The problem was even more so at times when complete isles were vacant of any goods at all. With nothing to sell, Target took up nothing but space. When demand is low, sellers drop the price, surplus becomes essential and shopping seasons (holidays, spring, back to school, etc.) become “hunting seasons.”
Brian Cornell, CEO of Target, said “Given that the holiday season is our busiest time of the year, we evaluated our fourth quarter performance carefully, and, unfortunately, didn’t see the step-change in our performance we needed to see.”
The consumer habits of Canada
This is arguably the most fundamental issue at hand: Canadians simply don’t buy as much and as often as Americans, according to the experts mentioned above. Consumerism is the pinnacle of cultural behaviours in North America, and to no surprise, it is most prominent in the U.S. In Canada, however, this habitual process is not nearly as energetic, as “one-stop shopping” is not a customary practice, where large malls are preferred over supercentres, due to their immense variety.
Higher prices
Although Canadian customers proved to Target CEO Brian Cornell that their shopping sprees are surely worth his time, they were not aware of what his expansion into Canada truly meant: In order for Cornell to expand successfully, before considering the U.S. to Canadian dollar (0.80 to 1), raising prices in Canada was essential for Target if they were to make a profit (projected at 2021) out of this exceedingly costly expansion. However, the very products that made Target a popular consumer destination were to remain in the U.S until sales proved stable in Canada, in order to avoid the dissipation of supply.
Location
Target purchased the Canadian discount chain, Zellers in 2011 for 1.8 billion dollars from HBC – a brilliant maneuver at the time, as Target had established its presence across the border with the acquisition of its Canadian counterpart, while simultaneously cutting the costs of building its own stores. That being said, most Zellers stores were in no way suitable for Target’s big space demands. The acquirement of these roughly-shaped, and ill-located stores, was the first mistake in the series of miscalculations by Cornell in Canada.
Target cannot compete with Wal-Mart
With 394 shopping centres across Canada since 1994, as opposed to Target’s overambitious 124 in 10 months, Wal-Mart was simply in a better condition to manipulative market prices in Canada. As Target was preparing to enter Canada, Wal-Mart Inc. was quick to lower prices, increase their offerings, and open new stores.
Some, if not all of these failings, should not surprise you; Canada simply does not stand up to the religious consumer habits of its southern neighbours – we buy less, our rough winters keep us at home, our environmental concerns far exceed those of the U.S., and our shopping sprees often congregate at large malls, where we reserve our paycheques on the variety of stores provided for us, rather than at one, all-encompassing franchise.