Way Off-Target: A $5 Billion Failure in Canada (and Problems in America)


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Much as Target can be admired for having created distinctive and (generally) positive retail experiences for customers in the U.S., their entrance into – and now their exit from – Canada has been a case study in botched customer and marketing strategy. Like a tsunami, the massive and destructive wave for this unfortunate result could be seen building at a considerable distance: http://customerthink.com/chasing-an-elusive-trust-rabbit-targets-problems-in-canada/

The company, it should be added, also has challenges in the U.S., many of which have been well-documented: http://customerthink.com/what-target-is-doing-to-regain-consumer-trust-and-one-of-the-most-effective-things-they-and-gm-couldshould-do/ Other problems, such as outdated stores – accused of being “90’s chic” – exist, but have been somewhat less actively reported: http://www.foxbusiness.com/industries/2014/05/16/targets-problem-no-one-is-talking-about/

After only two years operating in-country, Target’s departure from the Canadian market has resulted in the closing of all 133 stores and the laying off of more than 17,000 employees. According to company execs, the Great White North subsidiary was not expected to be profitable before 2021. Target entered Canada in a very active and assertive manner, with the ad tagline if “Expect More. Pay Less.”; but they significantly underdelivered on experience value, disappointing customers right out of the gate. Customers expected a good retail experience, but got considerably less. Immediately, the perception of Target in Canada was diminished and undermined, especially given their reputation in the U.S. Real or imagined overpricing, inferior merchandise quality, poor inventory and distribution control (empty shelves and stockouts), terrible store locations and store layouts, and an overall lack of understanding the Canadian consumer’s retail needs and wants were just some of the reported contributors to their demise.

At the end, instead of being seen as a trendy, customer-friendly and affordable store, Target Canada was caught in a hand-to-hand pricing battle with Wal-Mart, which is never a good idea; but Target was still viewed as being more expensive by comparison. This is a case study in poor senior management decisions, and the disconnect they have (or had) with the actual market. Branded customer experience can be both positive and negative; and, for Target in Canada, the brand and the experience alienated customers.

So, by consensus, here are principal reasons for the failure:

1. Poor Store Locations and Layout (former Zellers discount stores)
2. Misinterpretation of Customer Reception Into Market
3. Early Overpromise and Creation of High Expectations
4. Insufficient Stock and Inventory Planning/Distribution Chain Problems
5. Poor Quality Merchandise
6. Pricing Miscues, Resulting in Perception of Being Overpriced
7. Low Customer Trust/Failure To Meet Experience Basics
8. Diminished Sentiment and Reputation/Image
9. No Internet Shopping Site for Canadians

Any one of these could have impaired Target Canada’s brand image, cut into sales and loyalty behavior, and/or undermined store-level performance. Collectively, they spelled CUSTOMER DOOM; and Target seemed either unwilling or unable to make necessary course corrections in time, or with sufficient effort, to save their investment in Canada.

Before closing the stores, no matter how earnestly Target execs expressed their commitment to Canadian customers, every statement seemed to either fall on deaf ears or not be believed at the consumer level. Once the initial impressions and experiences had been so uniformly negative, customers in Canada were reluctant to give Target another chance to disappoint. Target CEO Brian Cornell said: “While we made some recent progress, the changes were not enough to inspire the guest to shop Target. We delivered an experience that didn’t meet our guests’ expectations, or our own. Unfortunately, the negative guest sentiment became too much to overcome” This is a pretty accurate assessment of what transpired.

As one analyst noted: “They diminished people’s image of what Target was. They should have done fewer stores, but better stores.” It took the company less than two years to go out of business in Canada. As noted above, there are strategic customer experience lessons here, which is why the blog can appropriately be titled “Way Off-Target.”

Michael Lowenstein, PhD CMC
Michael Lowenstein, PhD CMC, specializes in customer and employee experience research/strategy consulting, and brand, customer, and employee commitment and advocacy behavior research, consulting, and training. He has authored seven stakeholder-centric strategy books and 400+ articles, white papers and blogs. In 2018, he was named to CustomerThink's Hall of Fame.


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