It wasn’t the “Tar-zhay” they expected.
Canadian shoppers felt like they were “getting something that was second class,” says Maureen Atkinson, a senior partner at J.C. Williams Group, a retail consulting firm in Toronto.
“Target really did not deliver,” she told me. “It was a big miss on the part of the company.”
Minneapolis-based Target Corp. pushed into Canada in 2013, opening store after store in rapid succession. Last week, the cheap-chic discounter admitted the foray was a flop and announced plans to leave the country, shutting all 133 of its Canadian stores.
The post-mortems, which started immediately, contended Target didn’t understand Canadian consumers; that its inventory system failed to keep stores stocked; that prices were too high versus U.S. stores; that some store locations were subpar. (Target had purchased the leases of a Canadian discounter, Zellers, when it closed, allowing the all-out push.)
CEO Brian Cornell, who announced the pullout, said Target knew Canadians liked the brand, but the company could not get ahead of its inventory and price-perception problems.
“As a result, we delivered an experience that didn’t meet our guests’ expectations, or our own,” he wrote on Target’s blog. “Unfortunately, the negative guest sentiment became too much to overcome.”
Atkinson, whose company has worked with Price Chopper and the State University of New York, ventured that “had they been able to recover” from the negatives, Target might have succeeded eventually.
But with problems at home — Target lost its No. 3 spot among top U.S. retailers last year — “how many fronts can you fight on?” she asked.
Target’s financial results were ho-hum in the first half of 2014, before Cornell took over in August. Sales improved in the third quarter, and store traffic finally recovered from the massive data breach at the end of 2013 that had made customers leery, according to the company.
Even Canadian sales were on the upswing.
But Target was “losing money every day” in Canada, Cornell wrote on the company blog, and he saw no chance of profitability there before 2021. Less drastic measures, such as closing underperforming stores, were rejected.
“Ultimately … we fulfilled our obligation to do what was right for our company and our shareholders and made the decision to exit Canada,” he wrote.
Thomas Begley, dean of the Lally School of Management at Rensselaer Polytechnic Institute in Troy, characterized Target’s exit as “a dramatic move,” made a bit easier, though, by the fact that Cornell did not initiate the expansion.
“It wasn’t his decision” to go into Canada, Begley said of Cornell, so the CEO “didn’t own it.”
Sometimes the fresh eyes of an outsider like Cornell — he previously worked at PepsiCo — are needed to identify and find solutions to problems, Begley said.
But the dean admitted to being surprised by the pullout, which “essentially admits failure.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at marlenejk[email protected]
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