People at Ford once thought the Edsel was going to be the “bee's knees”. Some supposedly brilliant businessmen in Atlanta back in the Eighties figured all Coca-Cola needed was to give their flagship product a new flavor. So we shouldn't be that surprised that Target managed to do just about everything possible wrong when they decided the Canadian market was theirs for the picking. Yet we still are.
For those who didn't know, Target recently announced it was going to shut down its entire 133-store Canadian branch after a mere two years... and a mind-boggling two billion dollar loss there. Put into slightly more understandable numbers, it means every last one of their stores lost an average of $23 000 each time it opened its doors in the morning. That's an astonishing loss; but what makes it almost unfathomable is how everyone seemed to think Target capturing Canada's hearts - and wallets- was a slam dunk.
They had good reason. Canadians who vacation in Florida often came back loaded down with red and white bags and stories of Walmart's stylish and sexy little rival. Stores in Watertown,NY and Bellingham, WA reported back to the Minnesota head office about how many of their customers paid with Royal Bank debit cards or funny money colored like Monopoly currency. There was a genuine air of excitement in 2011 when they purchased iconic Canadian chain Zellers, for a cool $1.9 billion. The public seemed happy and the chain got millions of dollars of free publicity as the Canuck media treated the impending arrival of department stores as if it was the second coming of Jesus. Strike that. Given the fairly secular nature of Canada, the media coverage was in all likelihood much greater and upbeat than what a returning Christ would have won. What could possibly go wrong?
Turns out, plenty. Some day whole books will be written about the subject and how it nearly took down America's second-largest retail chain. Target misjudged the market, was to quote the Toronto Star, “arrogant”, veered away from their strengths and ran into some plain bad luck to boot. I don't have an MBA- but a number of the execs that mapped out the $2b debacle did, so I feel like I am qualified enough to comment. Besides, as a Canadian who's spent some twenty years working in retail and has resided on both sides of the 49th Parallel, I understand the field.
Its true many Canadians loved Target; loved going into the red-and-white stores when across the border. We saw them as being nicer-looking, more spacious, better-staffed versions of Walmart with nicer clothing and household accessories and were willing to pay a slight premium for the experience. “Slight” being an important adjective there. An alternative we didn't have back home, with the closest thing to a competitor to the Behemoth of Bentonville being Zellers, with their crowded stores, not-so discount prices and understaffed locations. As recently as 2012, CBC-TV found Zellers to be the company with the worst customer service in the country. There was a hole to fill. Unfortunately, Target's red-and-white rings didn't fit.
Some things were a bit beyond their control. For starters, in 2011, when Target made the decision to expand to Canada, it was moving into a country with an economy most “experts” (and the self-congratulating government) touted as being the strongest in the Western World. The economy was strong, the loonie was riding high, people were giddily optimistic. When stores began opening by the end of 2012, things had taken a turn downwards and today, with oil prices low, the GNP is down, the dollar has plummeted (which makes imports more expensive) and confidence is at a low. People don't spend as much when they think their employer will go belly-up any day now. The Star noted that one area that's especially hard-hit is female clothing, an area Target relies on for feet in the door and bucks in the register. Iconic womens' clothier Smart Set shut down not long ago, and rumors are many other specialty chains will follow. And there's the rapid adoption of online shopping, coming into bloom just as the Target bet the farm on people going out to the ol' bricks and mortar more than ever.
Then there was the Breach. Unlucky for them that right in the middle of the first Christmas shopping season for Target Canada, the parent corporation was hacked and suffered one of the biggest - and most publicized- security breaches on record. 70 million customers had their banking info stolen. Was the Canadian division part of the breach? Honestly, I don't know. I do know the story was massive news in Canada. Not exactly the way to woo new customers wondering where to buy stocking stuffers.
If all those weren't bad enough, there was the litany of problems that were fully predictable and within their grasp.
The company had terrible publicity during its first Christmas in Canada due to computer hacking; it suffered aisle after aisle of empty shelves during its second. Rosie Dimanno of the Toronto Star commented on the “scant” merchandise on the shelves and Bloomberg Business slammed their “botched inventory control.” People can't buy what's not on your shelf.
The empty shelves are not only inexcusable for an established company, they're remarkable given that one of the other problems they had was cramped quarters. Target stores in the US seem airy and spacious; they average 135 000 square feet- more for the Super Target locations. The size of the average Zellers store they took over was a scant 45 000 square feet. It doesn't take much to do the math and figure that the Canadian stores were either going to be missing significant amounts of product the American stores carried, or cramped and claustrophobic. From most reports, both were true. Little to encourage shoppers to pay more than they would for the same product elsewhere. Speaking of which, my American experience is that Target has driven their prices up much more quickly than competitors in the past five years. Even though the Target PR types warned people in Canada that they wouldn't be cheap like Walmart, the reality of their seemingly high prices shocked a large percentage of the population.
Not only were the stores too small for what Target wanted to do, in many cases, the locations were bad. Walmart ran into a similar problem in the 90s when they bought out Woolco in Canada; they rapidly made amends and bought out large parcels of land to build super-stores and rent out space to restaurants and even competitors like Home Depot and Victoria's Secret. The Walmart became a destination; a day out for families. Target on the other hand got roped into a lot of declining strip plazas and half-empty neighborhood malls. In suburban Oshawa, a city I know intimately, they took a location in a mostly empty mall rather than keep a bigger location in the regional mall that still drew crowds. My dad, not a retailer, but an observant person, commented on his first trip into a largish Target in Lindsay, Ontario, that it didn't suit the populace. Lindsay is a smallish (12 000), backwoods town with a customer base of retirees and farmers from the surrounding area; not the types who want discount designer labels or $30 picture frames. Not to mention that it was a town small enough for most people to have known some of the Zellers workers who lost their jobs when Target came to town. Therein lay another pitfall: Target had to either re-hire Zellers staff, who had a well-earned reputation for being surly (whether that was cause or effect is a study for another day), and have lacklustre people on hand, or start fresh and have a substantial block of disgruntled former-employees and friends who'd doubtless boycott them. Not a problem in Toronto or Vancouver, but perhaps a major drawback in a town of Lindsay's size.
Finally there was the whole misreading of the Canadian psyche. Canadians are a strange breed. We tend to love the USA and all things American; we brag when one of our musicians tops the Billboard charts south of the border and can name at least four dozen Canadian actors in Hollywood as easily as we could our own children. We love the selection in American grocery stores and the pleasant staff bagging the food (in free bags to boot!) there. However there's also a fierce nationalism, and a deeply-rooted fear of being taken over entirely by the States among many. Target might have been welcomed if they entered the country more quietly and with brand-new stores, but taking over Zellers got the goat of too many Canucks for their own good. Zellers might have been crappy discount stores, but they were our crappy discount stores. Too many people in the Great White North weren't going to forgive Target for taking that away.
Ultimately there are lessons to learn from it all and I'm sure big business will fail to do so. On a personal level though, we could take away a few things about being humble, assessing what makes us special and of worth and not diluting it, asking what we need to give to be more “bullseye” and less “bullshit”. We can hit the “target” in life better than Minnesota's favorite corporate son did.
For those who didn't know, Target recently announced it was going to shut down its entire 133-store Canadian branch after a mere two years... and a mind-boggling two billion dollar loss there. Put into slightly more understandable numbers, it means every last one of their stores lost an average of $23 000 each time it opened its doors in the morning. That's an astonishing loss; but what makes it almost unfathomable is how everyone seemed to think Target capturing Canada's hearts - and wallets- was a slam dunk.
They had good reason. Canadians who vacation in Florida often came back loaded down with red and white bags and stories of Walmart's stylish and sexy little rival. Stores in Watertown,NY and Bellingham, WA reported back to the Minnesota head office about how many of their customers paid with Royal Bank debit cards or funny money colored like Monopoly currency. There was a genuine air of excitement in 2011 when they purchased iconic Canadian chain Zellers, for a cool $1.9 billion. The public seemed happy and the chain got millions of dollars of free publicity as the Canuck media treated the impending arrival of department stores as if it was the second coming of Jesus. Strike that. Given the fairly secular nature of Canada, the media coverage was in all likelihood much greater and upbeat than what a returning Christ would have won. What could possibly go wrong?
Turns out, plenty. Some day whole books will be written about the subject and how it nearly took down America's second-largest retail chain. Target misjudged the market, was to quote the Toronto Star, “arrogant”, veered away from their strengths and ran into some plain bad luck to boot. I don't have an MBA- but a number of the execs that mapped out the $2b debacle did, so I feel like I am qualified enough to comment. Besides, as a Canadian who's spent some twenty years working in retail and has resided on both sides of the 49th Parallel, I understand the field.
Its true many Canadians loved Target; loved going into the red-and-white stores when across the border. We saw them as being nicer-looking, more spacious, better-staffed versions of Walmart with nicer clothing and household accessories and were willing to pay a slight premium for the experience. “Slight” being an important adjective there. An alternative we didn't have back home, with the closest thing to a competitor to the Behemoth of Bentonville being Zellers, with their crowded stores, not-so discount prices and understaffed locations. As recently as 2012, CBC-TV found Zellers to be the company with the worst customer service in the country. There was a hole to fill. Unfortunately, Target's red-and-white rings didn't fit.
Some things were a bit beyond their control. For starters, in 2011, when Target made the decision to expand to Canada, it was moving into a country with an economy most “experts” (and the self-congratulating government) touted as being the strongest in the Western World. The economy was strong, the loonie was riding high, people were giddily optimistic. When stores began opening by the end of 2012, things had taken a turn downwards and today, with oil prices low, the GNP is down, the dollar has plummeted (which makes imports more expensive) and confidence is at a low. People don't spend as much when they think their employer will go belly-up any day now. The Star noted that one area that's especially hard-hit is female clothing, an area Target relies on for feet in the door and bucks in the register. Iconic womens' clothier Smart Set shut down not long ago, and rumors are many other specialty chains will follow. And there's the rapid adoption of online shopping, coming into bloom just as the Target bet the farm on people going out to the ol' bricks and mortar more than ever.
Then there was the Breach. Unlucky for them that right in the middle of the first Christmas shopping season for Target Canada, the parent corporation was hacked and suffered one of the biggest - and most publicized- security breaches on record. 70 million customers had their banking info stolen. Was the Canadian division part of the breach? Honestly, I don't know. I do know the story was massive news in Canada. Not exactly the way to woo new customers wondering where to buy stocking stuffers.
If all those weren't bad enough, there was the litany of problems that were fully predictable and within their grasp.
The company had terrible publicity during its first Christmas in Canada due to computer hacking; it suffered aisle after aisle of empty shelves during its second. Rosie Dimanno of the Toronto Star commented on the “scant” merchandise on the shelves and Bloomberg Business slammed their “botched inventory control.” People can't buy what's not on your shelf.
The empty shelves are not only inexcusable for an established company, they're remarkable given that one of the other problems they had was cramped quarters. Target stores in the US seem airy and spacious; they average 135 000 square feet- more for the Super Target locations. The size of the average Zellers store they took over was a scant 45 000 square feet. It doesn't take much to do the math and figure that the Canadian stores were either going to be missing significant amounts of product the American stores carried, or cramped and claustrophobic. From most reports, both were true. Little to encourage shoppers to pay more than they would for the same product elsewhere. Speaking of which, my American experience is that Target has driven their prices up much more quickly than competitors in the past five years. Even though the Target PR types warned people in Canada that they wouldn't be cheap like Walmart, the reality of their seemingly high prices shocked a large percentage of the population.
Not only were the stores too small for what Target wanted to do, in many cases, the locations were bad. Walmart ran into a similar problem in the 90s when they bought out Woolco in Canada; they rapidly made amends and bought out large parcels of land to build super-stores and rent out space to restaurants and even competitors like Home Depot and Victoria's Secret. The Walmart became a destination; a day out for families. Target on the other hand got roped into a lot of declining strip plazas and half-empty neighborhood malls. In suburban Oshawa, a city I know intimately, they took a location in a mostly empty mall rather than keep a bigger location in the regional mall that still drew crowds. My dad, not a retailer, but an observant person, commented on his first trip into a largish Target in Lindsay, Ontario, that it didn't suit the populace. Lindsay is a smallish (12 000), backwoods town with a customer base of retirees and farmers from the surrounding area; not the types who want discount designer labels or $30 picture frames. Not to mention that it was a town small enough for most people to have known some of the Zellers workers who lost their jobs when Target came to town. Therein lay another pitfall: Target had to either re-hire Zellers staff, who had a well-earned reputation for being surly (whether that was cause or effect is a study for another day), and have lacklustre people on hand, or start fresh and have a substantial block of disgruntled former-employees and friends who'd doubtless boycott them. Not a problem in Toronto or Vancouver, but perhaps a major drawback in a town of Lindsay's size.
Finally there was the whole misreading of the Canadian psyche. Canadians are a strange breed. We tend to love the USA and all things American; we brag when one of our musicians tops the Billboard charts south of the border and can name at least four dozen Canadian actors in Hollywood as easily as we could our own children. We love the selection in American grocery stores and the pleasant staff bagging the food (in free bags to boot!) there. However there's also a fierce nationalism, and a deeply-rooted fear of being taken over entirely by the States among many. Target might have been welcomed if they entered the country more quietly and with brand-new stores, but taking over Zellers got the goat of too many Canucks for their own good. Zellers might have been crappy discount stores, but they were our crappy discount stores. Too many people in the Great White North weren't going to forgive Target for taking that away.
Ultimately there are lessons to learn from it all and I'm sure big business will fail to do so. On a personal level though, we could take away a few things about being humble, assessing what makes us special and of worth and not diluting it, asking what we need to give to be more “bullseye” and less “bullshit”. We can hit the “target” in life better than Minnesota's favorite corporate son did.