Quote EndQuote Cross-Cultural Strategy

Case Study: TARGET CANADA- How they Missed the Mark when it comes to Canadian Consumers

Posted by Vanessa Vachet | 01.26.15



Target - Missing the Mark when it comes to Canadian Consumers

Target – Missing the Mark when it comes to Canadian Consumers

When news hit the business world that Target had bought out Zellers in 2011 and was going to be expanding into Canada, there was a sense of excitement and anticipation. A major US retailer, second only to Walmart, was about to enter the Canadian marketplace. However, when Target reported more than $2 billion in losses after it promised investors that the Canadian business would be profitable by 2013, the end was already written on the wall.

 After declaring that it was losing money and would not see a profit until 2025, Target Canada decided to close its doors for good, shutting down 133 Canadian stores and letting go approximately 17,600 workers. Shock followed Target’s decision to pull out. The decision had come less than two years after the first Canadian stores opened in March 2013 in Ontario.


Where did they go wrong?


They did not take enough time to study the Canadian market:

Target seemed to underestimate the Canadian consumer. They took a successful business model that had worked in the US and transplanted it here, thinking that Canada was a just a ‘mini’ version of America. “I think they felt they could just put a Target logo on stores and shoppers would come,” said Nadir Hirji, executive vice president of Jackman Reinvents, a consultancy. It was a mistake to think they could just transfer one business model to another country.

“The collapse of Target in Canada can be partly blamed on the giant retailer neglecting to re-create the U.S. Target,” says a business expert. “That is, shoppers expected the same type of store that drew them across the border but what they found was higher prices and a lack of the products they wanted,” said Barry Prentice, a professor with the Asper School of Business in Winnipeg.

Target Store in Ontario

Target Store in Ontario


Simply put: They misunderstood the Canadian market. “They may have had signals, based on cross-border shopping, in which they thought, ‘Well, all of these Canadians are coming down, they must love us,” said Prentice. “Perhaps they thought the Canadian retail [market] must be weak or something wrong if all these Canadians are coming across the border, therefore it would be a cakewalk to come in. Things went wrong, obviously.”

They also didn’t give consumers a good enough reason to shop at Target. In a culturally diverse market, Wal-Mart had already been tapping into the largest ethnic consumer groups, South Asian and Chinese, by advertising in ethnic media over the past few years. Through television commercials featuring a new South Asian family preparing for their first Canadian winter, to a Chinese grandma purchasing snacks for a mah jong game, Wal-Mart’s breakthrough commercials created relevance among immigrants, Canada’s fastest growing consumer segment.


Too Much Too Soon:

Target’s launch in Canada was overambitious. The retailer opened 124 stores in 10 months in its first year. Perhaps they thought they could slide in to the vacant slot left by the dissolution of Zellers without Canadian consumers even noticing the switch. But the reality is that most Zellers stores were dumpy and poorly configured for Target’s big-box layout, say Wall Street analysts, and were in areas not frequented by the middle class customers Target covets.

Consumers were also repelled by Target’s offerings. Target’s entry into Canada had come with big expectations. Canadian shoppers thought they would receive the same rock bottom prices as their US counterparts. Canadians were shocked, though, when the prices shown were not what they had anticipated.

Prentice said the exchange rate probably had some impact on Target’s pricing, but “the Canadian retail market is also competitive,” states Prentice, “maybe more so than Target thought.”

Since other major chain stores such as Costco and Walmart had already built up a reputation among consumers for low prices, Target was coming into play at a deficit. By not aligning their prices to those of other Canadian retailers, Target had little to offer the Canadian consumer. “You have entrenched retailers here and coming in is very expensive to get started and established and they just probably had a hard time making ends meet and therefore it wasn’t a profitable thing for them to do,” says Prentice.

Opening 124 stores within such a short period of time also led to their supply problems. In fact, it was so bad, one employee reported having to fill half of an entire aisle with Tide detergent when the store had nothing else to fill shelves.

Supply did not meet the demand: Empty bread shelves at Target

Supply did not meet the demand: Empty bread shelves at Target

This disappointed shoppers who expected to see the same abundance as they did in their cross-border shopping.


Fostering ill-will in local Communities:

Combined with supply chain woes, Target quickly exhausted all that goodwill generated with Canadians before it arrived. Not only did Target come swooping in as Zellers was failing, snatching up most of the retailer’s stores nationwide. They also came in with a hammer, laying off close to 25,000 Zellers employees, with vague promises that they would find jobs for them once their Target stores opened. This promise did not bear fruit. Instead, Target cut staff, hired new ones and did little to aid the former Zellers workers. In fact, only 1% of former Zellers staff would find new jobs at Target and most of them were forced to return to entry-level pay. This move fostered ill-will with the immediate staff, who were let go with little notice. It also left a foul taste in Canadian consumer’s mouth as this was viewed as a slight towards Canadian employees who could have retained their former jobs.

Target Canada closed for Good. Will it ever return?

Target Canada closed for Good. Will it ever return?

Now that Target is pulling out of Canada, the retailer is offering a severance package to its former employees. Target is seeking the court’s approval to voluntarily make cash contributions of $70 million (U.S.) into an employee trust to provide Canada-based employees with a minimum 16 weeks of compensation, including wages and benefits for those not required to work during the wind-down.

While this move could be viewed as a peace offering to the Canadian consumer and the community at large, therefore keeping the doors open for future expansion into Canada, it was a lesson in PR management that, for Target, had come a little too late.


Written By: Vanessa Vachet, QuoteEndQuote Writer & Blogger




Resources: (Images: From Top to Bottom: Clipart target via instafluxs.com; All other images via Flickr Creative Commons:Kimco Realty, brownpau, Mike Mozart)