Missed the Target
Welcome to Willow’s weekly coffee and tea garden. My name is Paul, I’ll be your barista today and I’m happy to be here once again. Please come in and make yourself comfortable. Willow has plumped the cushions and started a cozy fire so we can warm ourselves while we have a cuppa and chat. As usual, I’d be pleased to bring a pot of whatever beverage you prefer – we have a wide range of teas and coffees to satisfy our world-wide readership. Also available is a large selection of spirits for addition to your cuppa or in its place. We can relax while we discuss the affairs of the week both personal and/or worldwide. How has your week been?
Hi, willow here, please forgive my intrusion but I somehow lost Paul’s guest post somewhere in the ether so it is all my fault he is late here . Please all of you and especially Paul forgive me!!
It’s been cold and dark and damp here all week. We haven’t gotten any more snow but there is no doubt that it is the depths of winter. There hasn’t been much exciting in my week, just the same routine. Which can be interpreted as good.
From a business perspective, though it has been an interesting week in Canada. The big news has been the failure and subsequent $7 billion bankruptcy of Target stores Canada announced a week ago Friday after less than 2 years of operating in Canada.
Would you like another cuppa and a sweet? Before your eyes cross with boredom – I promise that I’ll keep it interesting by looking at it from a shopper’s perspective and from a human perspective. Target is a competitor of Wal-Mart in the US. Wal-Mart does about $100 billion sales per year in the US and Target does a respectable $60 billion. Canada was Target’s first foray outside the US and they made quite a few serious mistakes that turned off customers so they stayed away in droves. Target bought out a Canadian chain that was failing in order to get the properties for development – properties that were in older malls and locations. They opened 133 stores right across Canada within a year and a half, employing over 17,000 people. And then they failed to have competitive prices and they had serious supply chain issues that left their shelves often empty. After losing over $2 billion in operations alone, they gave up and decided to slink back to the US to lick their wounds and give their stockholders the bill for the total $7 billion dollars they burnt through in less than 2 years – no doubt the largest retail failure for a company starting business in Canada.
Before Target arrived here, the Canadian retail market was basically shivering with worry that Target would come into an already well served market and take business from current retailers. To address that threat retailers prepared by increasing their efficiencies,holding prices steady, and trying to make customers happier by improving current prices and services. We, the customers, were quite happy with that and looked forward to Target’s arrival to provide even more competition. In the preventative category, the properties that Target was looking to buy changed hands a few times just to keep them out of Target’s hands. Eventually that proved to be a losing strategy and Target bought the leases and properties they needed.
So, on one hand, we were all interested to see Target reduce prices and yet we were all a bit scared about what they would do to the retailers and jobs that were already here. On Target’s part, they were certain – $7 billion worth of certain – that they could move into Canada and compete here to their profitability. And we believed them – the only question as how profitable, not whether profitable. Many of the Canadians who had been hired as the management of Target later said that Target was very arrogant and refused to listen to any of the input and suggestions of the very people that they had hired to run the company. Target simply ignored the reality of retailing here, and just transplanted their American operations into this market. They ignored the long distances between stores, the lower population, the longer supply lines, the competitiveness, the Canadian culture and, most of all, the sophistication and desires of Canadian shoppers. Target didn’t even bother to set up an online sales presence- a service that Canadians use a lot as one of the most wired countries in the world with long empty distances between markets. .
So, we stood in awe and fear as we watched an American giant march across our border and set up shop, determined to woe us with their operation and cleverness. And we peeked at what they had to offer and decided it wasn’t as good as what was already here, and we left. Not long after we watched with mixed feelings as the giant announced a massive failure, closed up shop and marched back from whence they came. On one hand it was sad to see the 17,000 jobs disappear, on the other hand it felt good that we had a marketplace that could withstand such an assault and walk away unscathed. It meant that we really were being well served by our marketplace and less of our hard earned money would now be siphoned south of the border. All in all an interesting story in Canadian retailing and a tale that will keep Business School students busy with case studies and assignments for years to come.
That’s about all we have room for this week, so it’s time to settle in with another cuppa and watch the fire. Sweets anyone? Please join me in thanking Willow for her invitation to tea. We are all honored that you dropped by today to visit. I hope you’ve enjoyed yourself and the conversation and please look around at Willow’s other posts while you’re here. Willow is over there serving her guests and chatting it up. Let’s go see how she is today. Have a great week. We look forward to seeing you back here for tea again next week.
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