After just a little more than two years in the Great White North, Target is returning south of the border as Canadian consumers gave the retailer the cold shoulder upon its arrival.
Target shocked the Canadian retail landscape on Thursday when the retailer announced it would be shutting down 133 stores and effectively laying off more than 17,000 workers. It will keep its doors open through the liquidation process, which is expected to last about six months, but the United States Company confirmed it’ll spend up to $600 million to shut down its Canadian operations. Its workforce is expected to receive 16 weeks’ worth of wages and benefits.
Brian Cornell, Target chairman and CEO, said in a press release that the company performed a thorough review of its current operations and its holiday sales performance and determined that it wouldn’t be profitable until at least the year 2021.
"The Target Canada team has worked tirelessly to improve the fundamentals, fix operations and build a deeper relationship with our guests," said Cornell in a statement. “We hoped that these efforts in Canada would lead to a successful holiday season, but we did not see the required step-change in our holiday performance."
Since debuting on the Canadian scene in March 2013, it received a barrage of complaints from customers. From empty store shelves to uncompetitive pricing, Target just couldn’t seem to please the consumer base. This even prompted them to issue an apology on YouTube one year later, but this didn’t appear to work with Canadians, despite being known for its forgiving and kind nature.
Target Canada seemed to be planning a long-term stay after it confirmed that it was going to launch a downtown Toronto store as part of a major commercial and residential project. Ostensibly, plans change.
Why did Target Canada continue to fail over the past two years? Here are four reasons why Target experienced its ultimate demise:
#1 U.S. Prices
For some reason or another, Canadian consumers expected Target to really compete with Wal-Mart by offering the same prices listed in its American stores. Target even conceded that it would not be installing the same U.S. price-tags in Canadian stores.
This in fact was one of the primary factors for consumers shunning Target stores.
It is reasonable to surmise that it simply isn’t possible for American companies to institute U.S. prices and merchandise in Canada, or any other country for that matter. There are a wide variety of aspects to this debate, which has been raging on for years; even Prime Minister Stephen Harper has given the Competition Bureau the green light to investigate the U.S. - Canada price gap.
Here are a few things to consider when discussing U.S. - Canada prices:
· Different labor costs
· Business regulations and taxes
· Foreign exchange
· Leases, rents, energy and property taxes
#2 No Demand to Fill
When an American brand enters the Canadian market, it is usually because they want to fill in a demand. However, there wasn’t a demand to fill at all. With Wal-Mart, Loblaw’s, Dollarama, Shoppers Drug Mart and so many other stores offering an array of products, Target was just another speck on the wheel with not much to offer.
#3 Word of Mouth
As soon as Target opened its doors in Canada, it immediately garnered a bad reputation. Consumers then vented on Facebook, Twitter, newspaper comment sections and YouTube about how awful the store is: unclean, disinterested employees, uncompetitive pricing and a paucity of merchandise. Why patronize a store that already has a horrific reputation after just a few months?
#4 Website & Poor E-Commerce
Open another tab on your web browser and visit the U.S. Target and Canadian Target websites. Notice how big a difference they both are. The American version is clean, organized and abundant. The Canadian version is unorganized, scattered and just screams indifference. It looks as if the executives at Target Canada had been taking Canadians for granted.
Furthermore, there is no e-commerce on the Target Canada website. Meanwhile, the American version gives customers the option to begin purchasing stuff online. Retailers and business experts always discuss the importance of e-commerce and mobile commerce and that they have to adapt to the marketplace.
Ostensibly, Target Canada employees did not get the memo.
Indeed, Canadians want competition. They want it when it comes to cable - especially when it comes to cable - mobile, food, tech, retail and a host of other goods and services. However, in terms of retail, Canadians already have an immense sum of choices, and stores have already embraced the multi-faceted model (for instance, Shopper’s Drug Mart now sells DVDs, laptops, eggs, tablets and other sought after products).
Why would a cost-conscious consumer frequent Target when it’s just offering more of the same?
The next time a U.S. corporation wants to enter Canada, perhaps it shouldn’t take the nation’s consumers for granted. Just because they’re successful in the U.S. it doesn’t mean they’ll match that same success in Canada.
Image source: Retail Insider