If We Were Having Coffee – Jan.25/2015 Guest Post: Missed the Target

Missed the Target

Paul your Barista

Paul your Barista

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.

And of course  the

IF WE WERE HAVING COFFEE:  WEEKEND COFFEE SHARE

over at Part Time  Monster  and Gene’O’s

 

38 Comments (+add yours?)

  1. Paul
    Jan 25, 2015 @ 19:11:46

    Hi Willow! ha! i see you found the post – i actually was to blame for not having it in on time in the first place – if i had, then you wouldn’t have missed it ’cause it would have been there when you expected it. I apologize. Thanks so much for your patience Willow, and thanks for the opportunity to blog on your site. I wish you a great week.

    Reply

  2. Let's CUT the Crap!
    Jan 25, 2015 @ 21:58:23

    Yeppers. Top story this week, here as well. I figured with such a fast-moving entry into a new market they must have one hell of a business plan. The first store opening should have been an eye-opener. Customers lined up before the doors opened. By the time they got inside and out the door, newspaper stories screamed about customer disappointment. I too feel sorry for the 17,000 employees who will be out on the street. Our government didn’t do their due diligence either, if I may squeak that out.

    Hope the upcoming week is unexciting = g.o.o.d. one. ❤

    Reply

    • willowdot21
      Jan 26, 2015 @ 06:42:43

      Paul is on his way with coffee Tess xxx

      Reply

    • Paul
      Jan 26, 2015 @ 07:04:32

      Hi LCTC! Thanks for dropping by for a cuppa. Yes, Target really misplayed their hand. What struck me as odd was that they heard from day one that their prices were not competitive and it was so. I live on a fixed disabilty pension so I watch the flyers and take the time to purchase where it is cheapest. i checked every target flyer and there was not a single product that I could not get cheaper at another store. Every time. And i was interested in visiting and yet could never find a reason to even darken their door. I was kind of disappointed that they came, they failed and they left before i even had a reason to visit.

      What did you mean about our gov’t? Did Target get tax breaks? I didn’t hear anything about that. Obviously the competition bureau would not be involved as the competition would have increased.

      Anyway, thanks for dropping by for a cuppa and a sweet LCTC. Y’all come back soon.

      Reply

      • Let's CUT the Crap!
        Jan 26, 2015 @ 12:25:42

        I don’t want to the the “foreign” country putting Canadian companies out of business drag, but like U.S. Steel, do they all not present a business plan of some sort? Something to do with the Competition Board? First Zeller sold and all the employees had to ‘apply’ for jobs at Target and now all these people are out of work and they can’t apply for U.I.

      • willowdot21
        Jan 26, 2015 @ 12:41:09

        A bad state of affairs xx

      • Let's CUT the Crap!
        Jan 26, 2015 @ 13:12:29

        Sigh.

      • Paul
        Jan 26, 2015 @ 14:37:30

        My undersatnding LCTC is that Taget is providing a reasonable separation pay for each employee – but you know that not every one will be able to find replacement jobs. The old Zellers/Target stores will now remain empty – those jobs will not reappear. The retail sales will be absorbed by the current players with perhaps a minimal imcrease in staff. The employees will be able to get UI after their layoff benefits have been used and they still don’t have jobs..

      • willowdot21
        Jan 26, 2015 @ 17:45:11

        Not a good out come.

  3. Diana
    Jan 25, 2015 @ 22:54:04

    Wow, this is really interesting. I had no idea that Target did so poorly in Canada in such a short time. They do quite well here in the States, I think. They’re still opening stores here, while some other chains (many of them older than Target) are closing their doors due to failure.

    Reply

    • willowdot21
      Jan 26, 2015 @ 06:37:25

      Paul is on his way with a cuppa

      Reply

    • Paul
      Jan 26, 2015 @ 07:25:34

      H Diana! Thanks for dropping by for a cuppa and a sweet. Yes Target does well in the US and my personal opinion is that they could have done well here in Canada too. They had no experience with opening stores in any market place except the US. Canadian and American markets appear very similar but they are not. The business literature is rife with companies, some large, that have tried to expand either way across the border and failed miserably. I had a prof in business school who wrote a book on it called Border Crossings. Anyone reading that book would easily see why Target failed. The weird thing was that they still could turn it aorund by cuttng prices and fixing their distribution problems but they chose not to. Maybe it was the older locations they had bought that reduced traffic. but you know, when Wal-mart came to Canada they started with old Woolco stores and made it work.

      Many Canadians who live close to the border, often go to the US to shop and have always brought back rave reviews of Target in the US. But these same customers who visited Target in Canada said they woukd not go back as the pricing was too high and the selection was poor due to stock outages. Imagine, Target came here with an already dedicated customer base and they still bombed.

      Anyway, it was kind of sad to see them go – if they had been competitive with Wal-mart they would have made a welcome addition to the retail marketplace. Akthough they would have damaged the business of many smaller retailers.

      Thanks for the visit and the comment Diana. Please drop by again.

      Reply

      • Diana
        Jan 27, 2015 @ 01:29:15

        Fascinating! I am particularly surprised that Wal-Mart has done well there when Target did not. Maybe that’s just because I hate Wal-Mart. lol

  4. markbialczak
    Jan 26, 2015 @ 00:56:08

    Interesting how badlly they missed the Target up in your country, Paul. A study in bad planning and execution, really. Now you are back to normal. Yikes. Bad U.S. store. Makes me want to apologize on their behalf. Hi, Willow, aren’t you glad Target stayed away from the U.K.?

    Reply

    • willowdot21
      Jan 26, 2015 @ 06:36:27

      Yup so far we are safe 😉

      Reply

    • Paul
      Jan 26, 2015 @ 07:49:25

      Hi Mark! Thanks so much for dropping by for a cuppa and a sweet. The big problem with American companies coming here is the difference in their warchest. There are 10 times as many Americans and so large US retailers have access to funds that are sufficient to wipe out Canadian retailers, if they chose. Like Target using $7 billion to open 133 stores essentially simultaneously. No one here has that kind of warchest. All we could do was watch and hold on. I don’t have any personal problem shopping at American based retailers – they all look the same to me. Imagine $7 billion – at 35 million in population – that means they spent $2o0 dollars for every living breathing Canadian. California actually has a larger population than all of Canada.

      But the market here has some very different qualities compared to the US market and vice versa. It is suprising as we share so much interms of language and culture and even weather (in some places) And we have the longest non-militarized border in the world. but the markets ar very different. There are a number of other US companies that have had to pull out of Canada (some recently) and many Canadaian companies that could not make a go of it in the US. It is tricky and Target was arrogant.

      Thanks again so much for dropping by Mark. It is a pleasure to see you here – please come by again.

      Reply

  5. simon7banks
    Jan 26, 2015 @ 07:53:36

    Sounds more than a bit like the US invasion of Iraq – “We can do it. We know how. It’ll all fall into place.”

    Reply

    • willowdot21
      Jan 26, 2015 @ 08:15:04

      😉 Paul is on his way

      Reply

    • Paul
      Jan 26, 2015 @ 11:27:15

      Yep, that’s pretty much it. However, it had been done before and the information was all there in black and white for them to learn from – the successes and the failures. They chose to ignore all that information that every business student could have pointed out. It is doable – Wal-mart did it, Sears, McDonalds, Wendy’s, Burger King, and many other American companies have done it. Tim Hortons did it in the other direction. It requires a sensitivity to the market and a willingness to hire those who know the market and listen to them. They did neither of those. their failures were obvious from day 1 – how they managed to go forward almost 2 years without ever addressing the issues that were there from the beginning boggles my mind.

      But you know that attitude – take what we want to give you – is prevalant in many companies. As an example, I owned a 1979 Kenworth highway tractor. It was Canadian built but the parent company was American, and so were all the designs and assembly methods. In the 1979 W-900 model, the windshield wipers would lift off the top of the windshield when ever the wind got strong or it snowed or rained hard. Not a good thing. Every single one of those trucks did that – it was a design flaw and every driver complained and every dealer and company rep knew. In 2002 I got into a brand new company owned 2002 Kenworth T-800 , pulled out of the yard into a snowstorm and realized the windshield wipers were doing exactly the same thing. Twenty-three years of complaints about the same flaw had not produced any change in design. That is pretty typical of the American companies we see here. Needless to say when Volvo entered this market with heavy trucks and they were very customer sensitive – their sales grew very fast.

      Anyway, you are right on Simon – a lot of the failures are a result of arrogance as was Target’s. Thank you so much for dropping by for a read and a comment. Please feel free to drop by again Simon.

      Reply

  6. idiotwriter
    Jan 27, 2015 @ 21:19:28

    Interesting post Paul! Sounds like a perfect analogy for the consequences of arrogance. Shame about the people losing their jobs… always the little guy that gets burned.

    Reply

  7. Paul
    Jan 27, 2015 @ 22:51:19

    Hi Belinda! Awesome to see you here. Thanks so much for dropping by for a cuppa, sweets, and a read and comment. We (that’s Willow and me – i’m not speaking of myself in the plural yet 😀 ) are honored. Yes it was a sort of arrogance. What most people don’t realize is that very often the same qualities that make asuccessful person also make a successful business. And the failures are often caused by the same things that cause individual failures. This is logical as businesses are really only people who are serving other people for purposes of filling a human need. All the processes and procedures of businss are an extention of that simple pricinple.

    So, there is a concept in business called “best practices”. The theory is that you can find the most effective way to complete and deliver any outcome and then just commit that to a process and then reproduce the same process over and over and the outcomes will all be equally good. Much like making a rubber stamp and then every time you use it the imprint looks identical. In our lives we call this living a life of principles. “Best practices” is the business equivalent of an individual’s principles. Now many would consider a person of principle to be a good person – but much as the Bible says that you ain’t gonna get to heaven by just your actions, so too, principles or best practices have an inherent flaw. That flaw is that you believe that you have completely understood the situation and now need never actually relate to the reality but only to your principle or best practice. This only works within a very narrow band of reality and outside that narrow band it becomes arrogance – I know best what is right and i will proceed with that belief.

    I bet you see where this is going. So Target has put together decades of best practices that made them billionaires in the US. They are creatures of habits – granted very good habits but nonetheless habits. The asumption being that what worked yesterday will work tomorrow. And they have become dedicated to their best practices and when they moved into Canada they used the same tried and true methods =- annnnd, the market was different. Instead if reacting to the reality by chucking their best practices and building new, they remained dedicated to their previously developed best practices and forward they steamed – full speed ahead and damn the torpedoes. From the very first day theyopened the customer concensus was negative and loud – prices too high and selection limited by stock outs.Instead of reacting to this customer commentary and addressing the problems, they stuck stupidly to their best practices, no doubt believing that if they just tried harder it would work. So they tried harder and not smarter and they buried themselves in red ink. And gave up.

    In personal life the real answer to interacting with reality is called acting with honor – i.e. putting the needs of others as paramount. In business this is called customer sensitivity. Many businesses have lost this becoming large lumbering dinosaurs that stumble along in a world that is constantly changing and yet continuing to do the same thing over and over. In personal life as well, there are far more poeple of principle than there are of honor. From a Biblical perspective acting on principle is not enough to get it. the rukles were made fo man not Man for the rules.

    And so Target, in pursuing their best practices learned in the US, completely missed the fact that the Canadian market is different and unique and they did not listen to the cutomers and I am willing to bet that even now – $7 billion later – they still don’t get it. Yes, they were arrogant, and they paid big time for it. Same as we as individuals pay for our arrogance.

    Thanks so much for dropping by Belinda. it is always a pleasure and i hope you come back to see us again. ;D

    Reply

  8. ChristineR
    Jan 28, 2015 @ 02:10:51

    A very interesting talk, Paul. So now I find out that Target here in Australia bears no relationship at all with the US, except the right to use the logo. Who would have thought! I’m sorry I missed out on coffee. 🙂

    Reply

    • willowdot21
      Jan 28, 2015 @ 06:19:09

      No you won’t miss out on coffee Paul is on his way with your favourite as we speak. 🙂

      Reply

    • Paul
      Jan 28, 2015 @ 06:56:04

      Hi Christine! Thank you so much for dropping by for a cuppa and a sweet. We have a wide range of coffees, teas, and liquors to please the tastes of our international visitors. It is a pleasure to see you here. You are right, Target US is based in Minneapolis and has no international interests. Canada was to be their first foray outside the US. My guess is they won’t try again soon. It is interesting that there is a Target in Australia with the same logo but with no link to the American brand. In a similiar situation Woolworths started in Utica New York and grew into the largest chain store group in the world by the eary 1900’s. They eventually went out of business here in the late 1970’s. Meanwhile an Australian group of companies borrowed the name as it was not registered in Auatralia. There never was any connection other than the name. I understand that Woolworths is now the largest retail organization on Australia. It is a strange world.

      Thanks again for dropping by for a cuppa and a read and chat Christine. Willow and I are glad to see you here and hope you will drop by again. Meanwhile, if you have a chance, take a look around at Willow’s posts. She would be pleased.

      Reply

  9. ~ Sadie ~
    Mar 01, 2015 @ 00:20:10

    Very interesting, Paul! I had not heard this, but haven’t been keeping up with much news lately, since most of it seems bad 😉 I never find the Targets in my area to be all that busy, though Walmart does a brisk business & is everywhere. I’ve been surprised that the Targets in my area are still running, because with the exception of the holidays they are dead & I have NEVER seen even half of their registers open ever. Enjoying these coffee talks!

    Reply

  10. Paul
    Mar 01, 2015 @ 00:56:37

    Hi Sadie! That is interesting – your observations of Target. I’ve never been in one so i really don’t know.They seem to be doing well financially in the US. thanks so much for dropping by and having a read. It is such a pleasure to see you here..

    Reply

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