“What approach should we use for the Target Canada case study? Break-even analysis? SWOT? Pestel?… Perhaps ratios would be the best. Better still, let’s all read the case one last time so that we can come up with a better understanding of the case.”
“Why RashCash? Na me chop target money?”
Target USA was doing relatively well despite the challenges they faced with competition in e-commerce, change in operation mode to increase reach and a significant breach in clients’ data. Considering the proximity to the US, the similarities between consumer behaviour, and the anticipation that got clients to make cross-border purchases, it was a safe bet to have Target Canada launched to diversify the brand and improve the overall revenue of Target brand. However, Target Canada did not survive, and as a result, RashCash would not let us rest.
Yorubas say “a ki fi ikanju la obe gbigbona” meaning “we don’t lick up hot soup in a hurry.” In their ambitious bid to expedite an aggressive launch in Canada, Target made some questionable decisions. This caused instability and losses to their entire Canadian brand right after the launch. While it is interesting to go big for Target, caution is needed when navigating “relatively” new waters. Certain factors were unique to Canada, and Target did not consider some of these. Some actual issues Target Canada faced are:
The anticipation by consumers and competitors brought Target in and out of Canada. Targets made forecasts of $1B in revenue during 2013, hoping to rise to $6B by 2017. Knowing the interest Canadian consumers had in the brand, Target went in significant trusting the weight of the brand to be enough to see the company through despite increasing cost.
Different but Poor distribution structure within a new market
Even though Target brought in senior management staff from the US to lead the Canadian teams and help instil the Target culture, the distribution structure adopted by Target Canada was significantly different from that of Target US. While the ratio of distribution centres to retail outlets remained about 1 to 44 in Canada as it is in the US, centres in Canada serviced stores as far as 1644 miles away. As a result of this, coupled with Target Canada’s continued to order inventory than what they shipped out, inventories piled up in the centres while retail stores had empty shelves. Data inconsistencies crept in and the sources of data error could not be ascertained.
Cost of Merchandise
Perhaps Target Canada was not keen on following Target’s “Expect More. Pay Less” tagline. It should be the only logical reasoning behind expecting consumers to stay loyal to a brand offering 14% higher prices than what they provided in the US. “Perhaps I should continue travelling across the border for Target products or move on to the competition. No time.”
Like the consumers, competitors also anticipated Target in the Canadian market. Companies like Loblaw made significant investments while some other US retailers moved across the border, giving consumers a variety of options when Target could not find their feet in Canada.
Even after paying a whopping $1.8B to Zellers for 220 stores leases and an average of $10.5M to rebrand each of about 133 stores, consumers still had the Zellers feel within the store. Perhaps some consumers knew portions of the stores that still identified with Zellers.
Ultimately, it was perceived that Target did not analyse the Canadian market realistically before delving in. It was perhaps blinded by the big ambition to extend its reach. As a result, accumulated a debt of $3.4B to over 1,700 suppliers causing them to lose face.
Target’s CEO Greg Steinhafel had to resign as a result of this poor performance of Target Canada. It prompted Target to take an outside hire, Cornell as CEO for the first time. Cornell did look into the performance in Canada, focusing on improving inventory management, pricing and assortments for the final quarter of 2014. They trained employees sufficiently, matching prices of local and online competition, and stencouraged stores rebranded with partnerships But then again,
“Aso o ba Omoye mo, Omoye ti rin ihoho w’oja” that is to say “it haff late.”Yoruda adage
In a move that cost over 17,000 jobs and able $2.1B in losses, Target Canada ultimately stated closing stored on March 18, 2015, paying back some of its leases and auctioning properties by May 2015.
So, Oga Madam, do me gently. No be me chop Target Money.