In the US, the retailer Target has a unique, well-established corporate culture that allows it to thrive. The $70 billion company promotes itself as ‘fast, fun, and friendly’ place to work for, citing this as the reason for its success, making just shy of $100 billion revenue in 2020.
Yet, why did Target struggle to expand into Canada, a location geographically close, English-speaking and familiar with the brand? I’ve done the research, and here are the 9 reasons why Target failed in Canada.
Why Did Target Fail in Canada?
The frequent frustrations of Target, from stocking issues, to checkout services, to the design and location of stores disenchanted Canadian customers. Target was unable to compete with existing markets and quickly found themselves floundering in a rush to keep up with their ambitious timeline.
If you want to know more about why Target did not succeed in Canada, including issues with pricing, location and competition, then keep reading!
1. Target Was Too Ambitious
Target was overly ambitious when expanding into Canada, relying too heavily on their success in the USA.
In just two years, Target opened 124 stores and expected to make a profit within the first year.
Due to the amount of money and locations Target aimed to open, former employees have described a ‘backwards’ system where they had to assume sales would be good, relying on Target’s branding and existing success.
Target made no efforts to collect sales reports for its Canada stores, leading to mistaken overconfidence.
2. There Was a Rush to Open
Target’s expansion into Canada was set to a strict timeline, as delays would be costly. Target had invested over $7 billion into the company and were seeking quick returns.
The desire to adhere to the schedule, despite constant issues and setbacks appearing, led to a rushed process.
Stores were opened without full preparation and rectification of issues such as stocking.
When open, staff were restocking shelves to fill the store, with signs around stores stating ‘we’re open (mostly)’, creating the appearance of an unfinished empire.
3. The Pricing Was Higher Than In The US
Many Canadians were already familiar with the Target brand and products.
Three-quarters of Canadians live within 100 miles of the US border, and would regularly bring back products due to the loosening of border restrictions.
Yet, the excitement to have Target in Canada was quickly diminished as Target Canada introduced the same products available in the US, but with much higher price mark-ups.
While initially excited, this soured shoppers to the experience.
4. Constant Supply Issues
Upon opening, Target in Canada quickly began to suffer from issues transporting goods from its distributors into stores.
Products from overseas were stalled, many were poorly suited to fit into shipping containers and some were even too big for store shelves.
Due to the rush of opening so many stores, Target simply did not have time to address these issues.
Additionally, foot traffic in Target stores was more than initially expected, which led to complaints from customers as shelves were both overstocked and understocked, the latter in essential household products.
The lack of such basic necessities made Target a poor competitor to existing brands.
Meanwhile, the three Target distribution centers (measuring around 4 million square feet in total) were overflowing with products.
The media and financial analysts were quick to publicize Target’s failures, creating a poor public image.
5. Poor Choice Of Locations
Target was able to open a multitude of stores with such speed due to acquiring the lease of the defunct retailer Zeller and its former locations.
Target had paid $1.8 billion for the privilege and wanted a fast expansion to maximize profits.
However, many of the Zeller’s store models were poorly configured for Target. Additionally, many were smaller than typical US Target stores, which cost money to expand.
It further cost money to rebrand the rundown stores with the iconic Target red-and-white aesthetics to create the coveted Target experience for shoppers.
Zeller stores also tended to be located within rundown shopping centers, outside of the frequented locations of Target’s middle-class demographic.
This meant Target was not attracting enough of the right kind of customers to ensure profit.
6. Target Underestimated Walmart and Local Competition
While Target’s upscale products were cheaper than department stores or fashion boutiques, their everyday, discounted goods were the same price in competing and established stores such as Walmart.
Furthermore, other retailers such as Walmart and Loblaws improved their prices upon Target’s opening, making them more appealing to existing customer bases.
This tactic successfully removed Target from an already competitive consumer space.
7. Poor Checkout Experience
Despite Target stores in Canada promising a quick and convenient checkout experience, in-store shopping was fraught with glitches.
The technology in use by Target was not equipped to deal with foreign country changes in Canada, such as the Canadian dollar and French-language characters.
Additionally, self-service checkouts frequently gave incorrect change, and cash terminals would freeze unexpectedly and take a long time to start.
Some Target check-outs would complete, allowing the customer to leave the store, even though the payments had not been correctly processed.
In the US, Target is proud of its training experience, offering developmental programs for even junior positions.
Employees are given months of instruction and paired with a mentor, and are often hired for their attitude to work culture over experience.
In Canada, they hired employees with the right attitude, but due to constraints they only received a few weeks of training.
New employees were also responsible for dealing with issues in the stocking system, involving entering data manually for around 75,000 different products.
Additionally, the lack of experience led to issues in completion, causing further complications.
Some management reportedly turned off automatic stocking processes so their reports would seem better than they were, further exacerbating issues for Target.
9. Target Canada Coulnt Shake Its Bad Reputation
For a year leading up to their opening, Target had hosted a number of high-profile promotional events to boost their image.
They had a pop-up shop featuring designer Jason Wu, an advertisement during the Academy Awards and Sarah Jessica Parker and Blake Lively were said to appear during the opening.
Yet, their image quickly declined. After their first year, they were forced to release an apology on YouTube reflecting on their downfalls.
Surprisingly, Target isn’t the only major US retailer to fail when expanding elsewhere.
Another prime example of a company failing to meet the demands of international shoppers was Walmart, which failed its operation in Germany.
To learn more about Target, you can see our other posts on whether or not Target is a franchise, some intriguing Target statistics, why Target is so expensive, and Target’s competitive advantages.
Conclusion: Why did Target fail in Canada?
Poor execution and large losses led to Target leaving Canada almost as quickly as it had arrived. By 2015, just two years after launching, all 133 Target stores had been closed in Canada, having spent $7 billion on the project.
The good reputation Target previously held among existing Canadian customers was gone, and the new customers they had hoped to entice were repelled by constant issues.
While Target succeeded in America as a corporate giant, it failed to compete with the existing market, leading to its inevitable demise.
Yet, it seems Target are yet to fully give up on the Canadian dream. They have a website where Canadian shoppers can order Target goods online, aptly named ‘Target Loves Canada’, even if it seems the sentiment is not reciprocated.