Target Canada Lasted All of Two Years, Why Did They Go Broke so Quickly?
Target Canada was a Canadian subsidiary of the United States-based discount department store group Target Corp. It operated in Canada for only two years and shut down in April 2015 after it filed for bankruptcy earlier that year. So what lead to this company going broke?
Canadian consumers had high expectations from Target. The company’s Canadian expansion was unsuccessful as it could not live up to these high expectations. Customers were left disappointed as the stores had higher product prices and lower product selection than Target stores in the U.S. Trade analysts believed that Target was being too aggressive in building its Canadian operations. They said it was a ‘case study in what retailers should not do when they enter a new market’.
Target’s operational problems
It could be said that operational problems were one of the main reasons for the company’s decline. This began when the company started its journey in Canada with an overly ambitious launch schedule. This somewhat inexperienced leadership team was expected to deal with the biggest crisis in the company faced since its inception. In short, it could be said that the giant chain was knocked over by basic and mundane errors it made. The company had decided it wanted to grow as quickly as possible if it were to enter Canada, rather than pursue a slow expansion, this, as they learnt later, was a colossal blunder.
The company’s measures for survival
Target did everything it could to keep the company up and running and maybe even make a profit. Employees in Minneapolis were seconded to work on the Canadian launch. Target poured in resources and removed barriers that could slow the progress. However, the compressed timelines negatively impacted the output. It was racing against a clock and made simple mistakes, for example building a new distribution centre could take a few years, however in Canada, it planned to do it in less than two years. Additionally, it decided to build three.
Technology too was one of the most important factors deciding Target’s presence in Canada. In the U.S., it used a custom made system that had been fine-tuned to meet the exact needs of the company. These systems were of crucial importance to their work there. However, in Canada, it was tricky to use the same software as it was not set up to deal with a foreign country and would have to be customized to take into account the change in currency and even the French language. Making these changes to the customized software would take time, but the company did not have any time. Hence, a ready-made solution was to be implemented even if there was not suited for its exact needs, and the company had no experience using it.