Sunday, January 18, 2015

Target - My post mortem on their failure

Get ready people, another person weighing in on how/why Target failed in Canada. I think I may have a qualifications that are relevant to my commenting on this subject. I am a Business Administration graduate and we went through a simulation 30+ years ago where we had to run a business on-line for part of a school year and we had a similar experience then what Target is going through now. That experience allowed us to find out the basics of starting and running a business and how easy it is to go under and the importance of planning in detail starting/running a business. The second is for almost twenty years I volunteered as an advisor and program director in the Junior Achievement program here in Ottawa. Over that period I helped show high school students what is needed to start up, operate and shut down a business. A lot of the student operations didn't make money, but, as a group we learned what should have been done, not done and done differently if we started again.

Consumer research. 

I don't know what business planning (if any) they did, but, from the end results Target didn't do their homework. Target should have researched why Canadians visit Target south of the border and find out why are we buying those products. Up here Target should have done market research on Canadian consumers and where are they located. Where do we buy, what do we buy, what are we willing to trade for cost/quality, who the competition is, what are they offering for price/quality and where are they located. They also need to do research on their competitors. Who are they, where are they and where their customers are located. When the stores Target opened up people were comparing Target to Zellers and the comparison wasn't good, the consumers liked Zellers better and Zellers went out of business selling those products!

Store locations

When they were looking to start they bought most of the leases from Zellers and while it may have been a good deal financially they should have done their homework on why Zellers failed and did location play a part of this. When they did start it was 100 stores and that may have been too many. Here in Ottawa/Gatineau they opened up five locations in about a year. In hindsight it may have been more prudent to open a smaller number of locations across Canada and then assess after 18-24 months before starting the next phase of expansion.


It takes a huge amount of money to start up an operation. What plans did they make to finance each store, what is the cost and the time line before break-even is reached. With the massive opening of 100+ stores it put pressure on the Canadian operations to hit all of their targets rather than having a limited operation which can be used as lessons learned for the next expansion. With a smaller start-up the financial pressures would have been minimized and if they were not meeting the numbers for per store sales the next phase expansion could have been delayed until the finances were fixed. For Target to shut down everything after two years indicates they obviously messed up their financial projections.


What was noticed from the first day is the stores had many empty shelves and that didn't get better over time. Target needed to know exactly how long it takes to move products to each store. While Target did have a good facility in Cornwall, logistics for keeping each store stocked was obviously screwed up. Again, having that massive start-up would put pressure on logistics and a small issue would get magnified. If they had a smaller number of stores it would have been an easier task to see where the bottle neck is and address the issue before the next expansion. You need to know how long it takes products to arrive from the manufacturer, how long it takes to get through customs, time lines required to ship the production within Canada via rail and trucks and then make allowances for bad weather.

Public Relation

This is another area Target made a major mistake. They never managed expectations of Canadians on what would be offered here in Canada. Most people in Canada were expecting a clone of Targets American operations, products and prices here in Canada and that was not realistic and many comments from people here in Canada was product/price/availability was not the same as south of the border. Their web presence, to be kind, was poor. In my less-than-humble opinion is that their web site was a cluster fuck. Most of Targets competitor in Canada allowed Canadian consumers to see what was offered, its price and availability and customer feedback (Hint, Walmart, Future Shop, Best Buy, Canadian Tire to name a few). Even many small business are offering this functionality and the Target web site really was a static paper-based advertisement and never gave the consumer any tools to do research before buying (on-line or at a physical location). Doing a quick look at Target's website in the United States I saw Target had an excellent interactive web site and I don't understand why Target could not make a version of that and make a Canadian version of this.

When Target was experiencing 'issues' keeping the stores stocked up was another failed PR opportunity. They could have used it as an opportunity to educate the Canadian consumers on the basics of logistics, apologize and then define a plan on how Target planned to address the issue so that Canadian consumers will have the products they want in the store with a solid time line.

Finishing up

The last mistake they made is completely shutting down operations in Canada. I don't know if it is possible to keep a limited number of stores running and fixing the issues, but, shutting down everything screwed Target in a number of areas. After this I don't believe Target would be able to re-open in Canada. Malls will probably ask for a lot more up-front after this. Financial institutions would also be asking for a much more detailed business plan and hike the cost of loans to Target. I am willing to bet if Target tries to open up in other countries there will be a lot more questions asked up front by the governments and businesses in that regard and insist on guarantees that will make openings a lot more expensive for Target.

No comments: