The Target brand succeeds at integrating emotion into its image. especially considering they are up against a Walmart.
Target’s official brand mission is to “help all families experience the joy of everyday living.” They honestly discuss how life is full of surprises, enjoyment, simplicity, and inspiration.
But Target is abandoning its $4.4 billion expansion into Canada after less than two years, The company announced in 2015.
The conditions were favorable for a successful expansion due to the market’s familiarity only with the Target brand, geographic proximity, and language and cultural similarities. Why did Target fail, then?
In our Target case study, we investigate why they failed to achieve a similar level of joy when they first entered Canada.
About Target Corporation
Target is an American multinational retail corporation that operates a chain of discount department stores and grocery stores. It was founded in 1902 as the Dayton Dry Goods Company and later rebranded as Target Corporation in the 1960s.
Target Corporation is America’s 2nd largest retail store chain today. Also simply known as ‘Target’, the brand has been in the business since more than a century and has come a long way to maintaining such a strong hold over the American and the international casual clothes retail market with significantly discounted rates.
As of today, Target retail has grown to a $106 billion company from a $70 billion company in 2017, with more than 350,000 employees, powering 1,948 stores that service more than 30 million guests a week, just in the United States.
The company is known for its “Expect More. Pay Less.” slogan and has a reputation for offering high-quality products at affordable prices.
Target’s first and only foray into international markets happened in 2013 in Canada.
In barely over a year, the business added 133 new locations overall. The growth, however, didn’t go as expected.
After losing nearly $1 billion in its first year in Canada. In April 2015, Target had abandoned the nearby country in North America and had shut all of its stores.
Target had promised investors that the Canadian business would be profitable by the end of 2013.
In an effort to turn things around, the company replaced the president of its Canadian operation and appointed a new CEO. But its attempts fell short.
It’s not like Canada is all that different, as we mentioned.
Furthermore, considering their close proximity to Canada, it should have been rather simple for them to figure out. Why did the plan fail? What were the major faults in the entry strategy?
5 Reasons Why Target Failed in Canada
Lack of research on Canada’s market
For any firm, breaking into a new, foreign market can be difficult. Despite this, it remains a critical step for every business wanting to expand worldwide in the age of globalization.
However, any ambitious growth plan can swiftly fail without adequate planning, research, and preparedness. Your company’s success in any new market, not only internationally, can depend on how well your growth strategy is put into practice and how well you deliver on your brand promise.
Don’t cut corners on your research or make educated guesses about your prospective customers or the market you intend to enter.
Target entered Canada so quickly that it was unable to keep up. But perhaps even more to blame was a lack of investigation or a desire to fully comprehend the Canadian retail sector.
Canada is a very diversified country in terms of both geography and culture. It is not just the second-largest country in the world in terms of land size, but each region also has an own consumer culture.
Target stores never discovered a method to set themselves apart once they first opened in Canada. They were not sufficiently different from Walmart.
Importantly, they let down potential loyal Canadian Target customers who had already embraced the US version of Target. Additionally, they didn’t look distinctive enough from Walmart to entice “new consumers” to check out Target.
When preparing company’s growth plan, take the time to not only research your new market, but also try to understand your prospects and how to differentiate your company and your services to fit their needs.
Empty Shelves…
@TargetCanada @Target I can’t buy anything if your shelves are empty. #Target pic.twitter.com/949ev4xrj6
— S. Bryan (@QueQat) January 7, 2015
Prioritize your new market’s clients even more than your “tested” systems. The supply chain management failure by Target in Canada could hardly have been worse.
Stores had bare shelves, insufficient amounts of the goods that people wanted, and an overabundance of the goods that they didn’t. The lack of inventory and empty shelves were complaints from customers.
Target customers were unable to purchase necessary items even if they attempted, while staff members reported that they were forbidden from stocking shelves with items that were really in stock because “getting off the layout” was unacceptable.
Not too surprised that Target is pulling out. I tried to shop there 5 times, since it opened, but left empty handed each time.
— Lori Ann 🇨🇦🛰 (@LADIDA83) January 15, 2015
As a Company looking to grow. when necessary, always put the needs of the customer (as well as your front-line staff) over the standard operating procedure.
The company had been working to improve its inventory management, but it was too little too late
Target Poor Store locations with high investment
Target invested too much and too fast in new locations and new employees.
Target’s larger objective in entering Canada was to establish the company’s foundation for a global empire. The company decided to purchase real estate from Zellers, an established Canadian discount brand, due to the proposal’s urgency and overly ambitious nature.
Target’s partnership with Zellers enabled it to open 124 shops swiftly across Canada, but it also meant that another brand that was very dissimilar to Target would be replaced. That’s almost half of Walmart’s footprint in Canada, who had been in Canada for 20 years.
The Fortune article referred to Zellers stores as being “dumpy” and located “in areas not frequented by the middle-class clients Target covets,” therefore they did not provide their customers with the same kind of experience that Target intended to.
Although Target then made a large financial investment to upgrade these stores.Target faced issues with its store layout and design, which did not appeal to Canadian customers.
The company’s stores were designed for a U.S. market and did not take into account the preferences and shopping habits of Canadian consumers.
Target’s CEO, Brian Cornell, stated in the company blog that “[…] we produced an experience that didn’t meet our customers’ or our own expectations. Unfortunately, the unfavorable customer attitude proved impossible to overcome”.
In essence, the excessive investment was wasteful and crippling to the business.
Establishing yourself as a distinctive, competitive brand with high-quality service offerings in the marketplace is the key to growth.
Even though it isn’t as quick and easy (i.e., “cheap and dirty”) as taking over another company’s prior position in the market, it is important to stay competitive while attempting to grow your business and your brand.
High Prices
In order to satisfy client expectations, brand consistency is essential.
One of the most intriguing aspects of Target Canada’s failure may be how much Canadian customers purportedly enjoyed American Target stores until a subpar Canadian store opened up next door.
Target found the courage to “conquer” Canada in part in the hopes of profiting from the success of the American Target locations there.
Canadian visitors to the United States have historically shopped at Target stores because of the high-quality goods, stylish, reasonably priced clothing, and even more affordable bargains.
However, upon the opening of its doors in Canada, Target received numerous complaints about the higher pricing found in the new stores, which weren’t quite as good as those at Wal-Mart, which has been a lengthy resident in the Canadian retail market since 1994.
Nevertheless, Target lost its competitive advantage since it was unable to fulfill its U.S. consumers’ expectations in Canada.
Whether you already have a reputation or a “buzz” in the market or not, your success will depend on how consistently you convey the best qualities of your brand.
This does not undermine the need of customizing your offerings to a certain area. It simply means upholding your brand promise whenever and wherever possible.
Intense Competition
Target is having a hard time competing with Wal-Mart, which expanded into Canada two decades ago.
And Prior to Target’s debut into Canada, rivals like Wal-Mart Shops. acted fast to reduce prices, broaden their product selection, and open additional stores.
Others increased their selections of goods and apparel, including Shoppers Drug Mart and Loblaw which is Canada’s biggest food retailer.
Many of the suburban Loblaws stores kinda look like Target stores. Consumers can get the same low-priced clothing for the cool moms, via the JOE FRESH brand. This took away a potential competitive advantage for Target to leverage.
No online presence, poor understanding consumer shopping habits
There was a sizable potential online market at the time Target opened its first shops in March 2013, when retail e-commerce sales in Canada were over $18.9B CAD.
However, Target decided to concentrate its growth on increasing the number of its physical shops rather than on e-commerce at a time when Canadians had long before adopted cell phones, social media, and internet shopping.
In reality, there has been a substantial shift in Canada’s use of the Internet for consumer transactions.
Now, customers can buy whenever they want, from wherever they are, with more options for price and product selection, and they can find goods that aren’t readily available locally.
Of course, this has an impact on and changes how people shop both online and offline. For instance, cost-conscious Canadians prefer to shop online before going to a physical store, and up to 61% of respondents say it is necessary or crucial to be able to examine in-store inventory online.
In the case of Target, the retailer had a Canadian website but didn’t sell anything there; as a result, customers were forced to visit the American website to compare Canadian prices and offerings with those of Target’s American locations, further alienating them from the brand.
Despite embracing e-commerce, Canadian consumers prefer to shop in physical locations. A dual approach combining in-store and online buying would be needed to adjust to this behavior and offer a smooth shopping experience.
Implement an omnichannel strategy, in other words, to engage customers online and ultimately encourage them to visit your stores.
Websites and mobile applications, in the words of Retail consulting expert Darrell Rigby, “for omnichannel merchants, are not merely e-commerce ordering vehicles, but also front doors to the stores.”
Stores are more than simply showrooms; they are also testing grounds, buying points, destinations for immediate pickup, support desks, shipping hubs, and return points with digital capabilities.
Target could have at least gathered information from an online store to help them make decisions about local tastes and demand.
In Conclusion
We can see that they did very little to win the hearts of Canadian consumers in the end. Their commitment didn’t actually make a difference.
Additionally, they failed to communicate their message to the Canadian market.
There was nothing magical about how they interacted with customers. And there is no magic in the shopping experience.
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