In January, American retail superstore Target announced it will discontinue all operations in Canada and are in the process of closing all its 133 locations as well as laying off over 17,500 workers. Hundreds of millions of dollars of inventory will be cleared in a liquidation sale with items marked down by 30 per cent for the first week, and up to 80 per cent come closer till Target’s full pull out.
According to an internal company email, 36 Target Canada stores have stopped receiving merchandise shipments while others are being bombarded with extra products. Stores will have various mark downs depending on the amount of surplus product as well as their geographical location.
A once promising new carrier for many Canadian Target employees has vanished and they feel betrayed with the measly compensation plan offered. Gregg Steinhafel , Targets’ failed CEO who departed last April is taking home 60 million dollars in a severance package. That is more than all the 17,600 are getting as part of their collective severance deal.
Employees are distraught and demoralized. A manager at a Toronto location said last week close to half his staff did not show up for a shift and managers continue to describe “nasty morale” as it preps for its liquidation sales. “I’ve got some people that have pretty much opted out,” the manager, who wished to stay anonymous, told the CBC. There are also reports that workers are being forced to work long unfair hours to move the remaining product.
Target Canada was brought down by terrible customer service, lack of product selection, bad presentation, poor inventory management and pricing that didn’t meet the value proposition customers were expecting. These were all under the control and influence of management. Walmart didn’t have to do anything but continue believing in its successful merchandising model that protects its strong presence in the Canadian marketplace.
How Target Canada’s Structured Its Own Demise
Target Canada’s demise simply says that you can’t copy a successful model into a new and unique marketplace. Yes, Canada is unique. Even the various Provinces have their own characteristics and market niche. Quebec has style and is willing to pay extra for something different and more upscale, whereas in Ontario, value is king.
Target may have taken on too much, too fast, before proving it could support the new wide and disperse supply chain that it needed to feed the 133 stores across the country. Target also supplied the majority of items for its Canadian stores from US distribution centres. The Just in Time (JIT) inventory management system used was set to disregard initial sales as exceptions, attributable to customer’s interest and excitement with initial store opening. Well that didn’t last long as shoppers soon found store shelves empty. Did management think no inventory was better than excess inventory? More information about Target’s distribution centre network can be found here.
The family-friendly model implored by Walmart is a proven winning formula around the world. By drawing in parents with their kids, it allows for a wider surveillance of the products for sale. Placing age specific products in direct opposite corners of the floor, it allows for an opening in the middle floor for the higher priced products and ‘essentials’ to be sold, which is what keeps your company afloat and able to meet a bottom line that will keep you in competition with the likes of Walmart.
Perhaps Target Canada didn’t understand the Canadian market or the Canadian market didn’t see Target as a serious alternative to Walmart. Whatever the reason, overworked and under-paid employees have been left to pick up the slack for poor executive decision making.
Let’s examine these points to understand the marketing lesson that Target in Canada taught to the public.
Understanding the Unique Canadian Market
One of the critical lessons from Target Canada’s failure is that a successful model in one country may not translate seamlessly to a new and distinct market. Canada is indeed unique, with each province having its own characteristics and consumer preferences. Quebec, for instance, values style and uniqueness, while Ontario prioritizes value-driven offerings. For retailers looking to expand into Canada, it’s essential to adapt strategies to cater to the specific demands of each region.
Supply Chain and Inventory Management
Target’s aggressive expansion approach in Canada meant they had to establish a wide and dispersed supply chain quickly. However, they faced challenges in managing inventory effectively to meet the demands of all 133 stores across the country. Relying heavily on US distribution centers proved to be a flawed strategy, as it led to supply chain inefficiencies and empty store shelves. Big retail competitors must recognize the importance of localizing supply chains and investing in efficient inventory management systems to meet customer demands promptly.
Walmart’s Family-Friendly Model
Walmart’s family-friendly model has proven successful in numerous markets, including Canada. By creating an inviting environment for parents and children, they can attract a broader range of customers. Placing age-specific products strategically throughout the store enhances the shopping experience and encourages increased surveillance of products. This model has allowed Walmart to maintain a competitive edge and secure a steady stream of revenue from essential items.
Understanding Customer Expectations
Target Canada’s failure can be partly attributed to a misalignment of customer expectations and the value proposition they offered. Canadian consumers had certain expectations, which included excellent customer service, a wide product selection, and competitive pricing. Target fell short on all these fronts, leading to disappointment and a lack of brand loyalty. Retail competitors must invest in market research to understand local preferences and tailor their offerings to meet customer expectations effectively.
The Impact on Employees
The closure of Target Canada had a devastating effect on its workforce. Over 17,500 employees were laid off, and many felt betrayed by the meager compensation offered. Reports of workers being forced to work long, unfair hours during the liquidation sale added to the distress. This highlights the importance of treating employees fairly and with respect during times of transition or crisis. Maintaining employee morale is crucial for maintaining productivity and customer satisfaction.
The Bottom Line
Target Canada’s demise serves as a cautionary tale for big retail competitors looking to expand into new markets. It emphasizes the need for understanding the unique characteristics of each market and adapting strategies accordingly. Successful models from one country may not necessarily guarantee success in another. Instead, companies must invest in localized supply chains, efficient inventory management systems, and customer-centric approaches to thrive in diverse markets like Canada. Moreover, treating employees well and respecting their contributions are essential for fostering a positive work environment and long-term success. As the retail landscape continues to evolve, learning from the mistakes of others will undoubtedly be a critical aspect of success for big retail players.
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