Target has finally given up on its Canadian expansion efforts to concentrate on other, more lucrative markets. Target’s failure has cost the company over $2 billion and has shone a bright light on the challenges of doing business in Canada.
Logistics Led To Failure
Target has been plagued by a massive supply chain failure. Stores often had empty shelves and merchandise was not arriving on time. In a recent interview with A Bullseye View, a website dedicated to everything Target, Target CEO and Chairman, Brian Cornell discussed some of the challenges the company faced. Cornell admits, “We missed the mark from the beginning by taking on too much too fast. We have been very honest along the way that we had several operational challenges. Our stores struggled with inventory issues and we were not as sharp on pricing as we should have been, which led to pricing perception issues. As a result, we delivered an experience that didn’t meet our guests’ expectations, or our own. Unfortunately, the negative guest sentiment became too much to overcome.”
The company failed to grasp the vastness of the infrastructure and supply chain to adequately maintain logistics for 133 stores across the massive country. Possibly, if the company had taken a more conservative approach, the company could have started in one province close to US operations to ease the strain on logistics efforts. Instead, the company opened stores all over the country in rapid succession, without a distinct plan in place with suppliers, vendors, and its own departments to keep the stores fully stocked. Photos of empty shelves and stories of disappointed shoppers flooded the internet, even as the company continued to expand. As recently as October, the company was still opening Canadian stores.
As any retailer knows, stock-outs are a profit killer. Not only can you not sell what’s not on the shelf, but customers tend to go to a competitor to find the product, possibly costing you that customer’s future business. The cost to reacquire that business can be astronomical, and Target does not have the time and money to put forth that effort.
Another Big Blow To Canadian Retail
Target’s complete pullout comes as a bit of a surprise, as many experts believed the company would either scale back, or attempt to right the ship over the next few years. However, Target’s planned exit and seeking of credit protection is just another in a long list of retailers who have found the going tough in Canada.
Sears Canada has been shuttering stores and selling real estate left and right.
Sony Corp. is closing all 14 of its Canadian stores this year.
Best Buy closed 15 namesake and Future Shop stores in 2013 as part of a streamlining process.
Big Lots closed its operations in Canada along with all of the Liquidation World chain in late 2013 and early 2014. This involved closing nearly 80 stores and several distribution centers.
Although Canada is a large enough market to absorb a lot of these retail losses, jobs are where people are being hit the hardest. Nearly 17,600 jobs will be lost in the Target closing, and it will take a toll on local economies. This number does not even take into account various vendors, trucking companies, and suppliers who may have to reduce workforce levels due to the loss of Target’s business.
Hopefully other Canadian retailers are able to capitalize on these closures to expand operations and rehire a significant portion of the displaced workforce.