When Target exited Canada in January 2015, it left behind a trail of shuttered stores, jobless workers, and stiffed suppliers. It was a stunning admission of defeat, just two years after it’s much-hyped cross-country rollout.
The numbers alone are staggering: 133 stores closed, 17,600 employees laid off, $3.4 billion owed to 1,796 creditors.
Target’s struggles in this country were held up as yet another example of a U.S. brand failing to adapt to the retail reality across the border. Explanations for its dismal performance abounded: Target offered the wrong products because it didn’t understand the tastes of Canadian consumers; supply chain problems led to empty shelves and disappointed shoppers; the company opened too many stores too quickly; stores focused too much on discount merchandise, alienating people who were expecting the kind of chic clothing that earned the retailer it’s “Tar-zhay” nickname.
Now, thanks to “The Last Days of Target,” Joe Castaldo’s in-depth look in Canadian Business, we know what actually happened. Here are five things you should know about the incredibly stupid story of Target Canada’s difficult birth, tough life and brutal death.
Don’t overpay for access
To enter Canada, Target bought the leases of discount retailer Zellers from parent company Hudson’s Bay Co. for a staggering $1.8 billion:
[Then Target-CEO Gregg] Steinhafel bought everything, essentially committing the company to opening stores as quickly as possible to avoid paying rent on stores that weren’t operational and leaving landlords without anchor tenants. The price Steinhafel paid raised eyebrows. “When the numbers got up as high as they did, we found that pretty surprising,” says Mark Foote, the CEO of Zellers at the time.
It was a move Steinhafel would later identify as the one thing he’d do differently if he could do the Canadian rollout all over again.
Don’t set unrealistic timelines
The huge capital investment in real estate meant Target needed to get up and running, pronto. So while the company sent some of its brightest stars to oversee its new Canadian arm, it was putting them under immense pressure:
“From the very beginning, there was a clock that was ticking,” says the former employee. “And that clock was absurd.” The company did everything it could to remove barriers that might slow progress and to ensure decisions could be made quickly. Timelines were hugely compressed.
One rush job: distribution centres, which typically take a few years to plan and build from scratch. Target’s rollout strategy called for three new facilities in under two years.
Don’t forget to train your people
Target prides itself on its corporate culture, including a robust employee development program that produced top managers like Target Canada president Tony Fisher. But the company had no such people infrastructure in its new market:
In Canada, the company succeeded in hiring people with the right personalities, but young staff received only a few weeks of training, according to former employees who worked at Target in both countries. The Canadian team lacked the institutional knowledge and time to properly mentor the new hires.
One consequence: a very green workforce. A former employee, in his mid-30s, recalls being one of the older people there.
Don’t flub the first impression
Target’s Canadian launch generated a whole lot of hype. But data quality problems were hampering the company’s supply chain, leading to stock problems:
The foot traffic in the early days was more than expected, which was encouraging, but it didn’t take long for consumers to start complaining on social media about empty shelves. “Target in Guelph, please stock up and fill the shelves,” wrote one aggrieved shopper on Facebook. “How can I or anyone purchase if there is nothing left for me to buy?”
As more and more shoppers left stores empty-handed, consumer perception of the brand soured.
Don’t drop out of sight
As a young executive struggling with a troubled, high-stakes project, Fisher was probably spending a lot of time putting out fires. But whether it was because of his taxing schedule or the pressure he was under, ordinary employees were unnerved when Fisher seemed to drop out of sight:
In the early days, he was a constant sight on the floor of Target Canada’s open-concept office, chatting with employees at all levels. But he and some of his leadership team became less visible as problems mounted. “For leaders who have experience with failure, that would be the last thing you do,” says a former employee. “You would be front and centre, give confidence and reinforce the direction. That didn’t happen.”
Steinhafel and Fisher both left the company in early 2014. Though Fisher is remembered fondly by employees (“He’s probably one of the smartest people I’ve met”), his lack of visibility hurt the company.
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There are a ton more lessons for business of all sizes in Joe’s feature. Read it in full by clicking below: