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Remembering Target Canada One Year Later: Lessons Learned, Long-Term Impacts, and Why it Failed

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By Saul Carliner

April 12 marked the one-year anniversary of the closing of Target stores in Canada. In the Jewish tradition, we mark the anniversary of a passing by observing yahrzteit, or remembering.

Although Target might have only lasted about 2 years in Canada (some stores as few as 6 months), because of the size and scale of the operation, it will continue to affect Canadian retail for the foreseeable future. In this essay, I identify some of the long-term impacts and lessons about the Target fiasco in the Far North.

1. Target actually had some better brands of merchandise in Canada than in the US. For example, in its housewares department, Target Canada carried the Joseph Joseph line of high fashion kitchen accessories. Target USA does not carry this line; JC Penney had it the last time I checked (a few months ago). Joseph Joseph is also carried by Hudson’s Bay in Canada and Macy’s in the USA—“next step up” stores.

But I’m not sure anyone noticed and I don’t remember Target making much of an effort to promote this. And Target should have.

Target carries the Kitchen Aid line in its USA stores but Canadian Tire seems to have an exclusive on that line in Canada, meaning that Target couldn’t carry all of the merchandise in Canada that it carries in the USA because of existing agreements between the same suppliers and other stores. (I conjecture this because I don’t see it elsewhere and Target didn’t carry it.)

Even before it opened, Target said it would have some unique products in Canada that it didn’t sell in the US. In the case of housewares, Target “traded up” for some better merchandise but never really announced it. They should have promoted Target Canada exclusives in store and in its advertising and defined exclusive as either not available in Target USA or only available at Target.

2. Target got help screwing up some of its Canadian merchandising. Although Target admittedly has primary blame for its failure in Canada, it actually had help screwing up a number of its departments. As I noted in the previous post (and others have noted, too), Target had a lousy and overpriced merchandise mix—especially in groceries and health and beauty- pharmacy. But in many parts of the country, Target relied on a major local supplier to help with those. Groceries were supplied by Sobeys and, at least in Quebec, pharmacy was supplied by Brunet (part of the Metro group).

I only know about these from what I read in the paper and saw in the stores, but as I understand the situation, they were supposed to provide a Canadian imprint on these departments. The problem is, they put a Sobeys or Brunet imprint on these departments, someone forgot that these are Target departments.

It appears that no comparison was made with the merchandise mix at Target US and Target Canada, something that Target should have overseen and required of its suppliers. Furthermore, it appears that no effort was made to coordinate store brands between the two countries; it appears that Sobeys and Brunet store brand products was merely packaged in Target store brand packaging. So what appeared to be similar or identical products to Target USA on the outside seemed like substantially different products on the inside.

3. Target might not have lasted, but mall upgrades made to accommodate it have. Before Target announced its entry into Canada, many Canadian malls—especially in the Class B and Class C ranges—had delayed necessary renovations. Malls like CF Galeries d’Anjou in Montreal and Bayshore Shopping Centre in Ottawa appeared stuck in the 1990s, both in terms of appearance and lackluster store mix.

Expecting greater foot traffic from Target, however, these malls finally entered the second decade of the new millennium. They remodelled their interiors, updating colour schemes, furnishings, and decorative elements. They reworked their store mixes. The updated malls appeared more fashion-forward and reflective of the times.

Want more details? See my recent reviews of Galeries d’Anjou, Bayshore Centre, and Place Vertu—B and C malls that remodelled around the time that Target arrived.

4 . Target might not have lasted but upgrades to its competitors leave them in stronger positions long-term. Target thoughtfully gave Canadian retailers two years’ warning of its arrival and the retailers used that time to significantly up their game. And most major retailers did, with Canadian consumers benefitting long-term, even if Target didn’t last. Consider these long-lasting improvements to some iconic Canadian retailers:

Canadian Tire: Strengthened its coverage of the basics and customer service, and re-emphasized its place in Canadian communities to maintain its place as the go-to-store for anything basic in the household, the place that Target tried—and ultimately failed—to supplant. Instead, Canadian Tire seems to have strengthened its role as the go-to store for anything basic in the household.

Hudson’s Bay: Transitioned from a ho-hum four-century-old operation to one that looks relevant and new. (Of course, the $1.2 billion it received from selling its Zellers leases to Target helped.) It emphasized higher end and quality fashion and home furnishings to distinguish it from the cheap chic expected from Target.

• Loblaws: Strengthened the design appeal of its housewares (looking chicer than Target’s while offering similarly low prices) and launched the Joe Fresh clothing line, which challenges Target’s on price and style.

In a bit of tit-for-tat, Loblaws tried to strike back by launching Joe Fresh in the USA. As Target failed in Canada, so Joe Fresh seems to have quickly gone stale in the US: its relationship with JC Penney cut short and its Fifth Avenue flagship in New York quickly closed.

Metro: The central and eastern Canada grocer continued to focus on groceries, but upscaled the experience. It brought all of its stores under the Metro brand (previously limited to Quebec) and reworked its logo Metro also expanded its prepared foods, strengthened its store brand, and launched an American-style grocery store loyalty program (Metro et moi / Metro and me).

Sears Canada: Although on a self-inflicted death spiral, Sears made some nominal moves to counter Target, including a couple of store remodels in malls where Target would also locate (like CF Galeries d’Anjou in Montreal).

But Sears most interesting moves came after the store closed, when it offered jobs to Target employees. Admittedly, that was a head scratcher, as Sears has been laying off employees with increasing regularity. But in the end, Sears is still here and Target isn’t.

Walmart: Already having had upped its design game for US stores to compete against Target’s admittedly diminished housewares (which suffering from the departure of major designers like Michael Graves), Walmart decided to primarily compete with Target in the grocery department, expanding many of its existing Walmart (which have a small grocery section) to Walmart Supercentres (which have full-line grocery stores in addition to all of the other departments).

TARGET CANADA
PHOTO: TARGET CANADA

5. Target might not have lasted, but some of its empty storefronts will serve as long-term reminders of the failure. One of the long-term problems of Target leaving is that it also leaves lots of empty space: about 2 to 3% of all retail space in Canada. About a third of its leases were picked up within 9 months—some by Walmart, some by Lowe’s, some by a gym—but the majority are vacant and are likely to remain that way.

That’s because the demand for 120,000 square foot stores is limited. A few malls are rebuilding the space so they can lease smaller stores.

But in a climate whose medium-term outlook for the next few years is flat, absorbing all of that still-vacant space remains a challenge.

So shadows of Target signs remain on walls in and out of malls that look like Target bullesyes but aren’t any more.

And nothing looks more creepy than a big vacant store.

6. Target needs to revisit its playbook for entering a market, especially if it tries again to enter international markets with bricks-and-mortar stores. Target likes to enter new markets by making a splash and launch a number of stores all at once.

According to the in-depth report on the last days of Target Canada in Canadian Business, Target felt compelled to open quickly in Canada because they had acquired so many leases and could not afford to pay rent on so much vacant real estate for an extended period of time.   

This certainly sounds plausible.

But it overlooks Target’s history: how Target entered new markets in the US. It reads just like the playbook for Target Canada. When possible, Target would buy the real estate of a distressed competitor, such as Richway in Atlanta and Ames in Boston. If necessary (as it was in Atlanta), Target waited until after the store liquidated its merchandise and formally laid off its staff, before bringing in the construction crews and hiring teams to open a new Target.

That’s what happened with Target’s purchase of Zellers leases.

The massive construction-then-massive-launch approach might work in the US, where communities are increasingly similar in their day-to-day needs, and, except for some local variations, the company would still retain its basic supplier relationships, operating logistics, and HR practices (with minor adjustments for local laws and customs).

But even though the population of Canada is about the same size of California (or about 5 Target market areas), it’s a different country and Target could have considered an entirely different playbook.

Rather than buying the leases, emptying the stores, laying off all of the talent, and investing in reconstruction, Target could have purchased Zellers’ outright, taken advantage of its expertise, supplier relationships, ongoing operations,  and, significantly, functioning inventory control system, then made adjustments as it learned the market and slowly but surely convert the Zellers stores to the Target nameplate, learning from the successful lessons of Walmart’s successful entry into Canada at Woolco stores.

TARGET CANADA PHOTO: ARCHITECTUREANDBRANDING.WORDPRESS.COM

7. Although Target’s policies are written to value human resources, its choices in Canada suggest that a bridge still exists between what’s written on paper and what’s practiced in the business. One reason that Target had chosen to wait to occupy a former retailers’ space rather than merely take over its business as described above is that Target is a non-union company and most of the stores it has replaced had unionized staffs. Without going into the pro- or anti-union issue, which is beyond the scope of this discussion, practical considerations suggest that addressing broader business needs might necessitate rethinking this employment practice.

In this particular situation, Zellers was a functioning business and Target would have rebuild all of that from scratch.

But Target also ignored the practical limitations of the real world when choosing to do so, because the company made three other choices that rely on effectively managing human capital dimensions and, in both cases, made disastrous choices.

The first two choices are related: planning to open 133 stores across Canada within three years and launching a two significant pieces of technology–an inventory control system and a point-of-sale system–both of which touch on every part of the organization. Both timetables were unrealistic, but especially the inventory control system, on which the entire operation of Target depended.

Anyone with passing knowledge of enterprise systems knows that such a comprehensive system cannot be launched in two years, no matter how smart the people working on the team or how experienced the systems integrator (Accenture in this case.)  Canadian Business has an amazing post-mortem of the situation. Both systems probably could have been successful if management had been realistic about the schedules for systems planning, installation, customization, and implementation. And they could have been realistic, because a wide body of experience with enterprise systems in general, and inventory and point of sales systems, in particular is available. But management chose to ignore that  almost all of that history suggests that a successful implementation requires three to five years. In other words, they ignored one of the most basic principles of human performance: the best predictor of future performance is past performance.

The third choice Target made was to shortchange training. I had been aware of that problem; I had spoken informally with certified trainers whom Target lured from other Canadian retailers. But the trainers I spoke to were hired on contract and told me that, as soon as initial training was complete, Target dismissed them. Ironically, these trainers provided training on their systems.

That might not have been as serious of a problem in Target USA, the company not only has functioning inventory control and point-of-sale systems, but also has experienced workers who can provide the development needed to bridge the gap between classroom training and the job.

But all of Target Canada’s employees were new and, as happens in situations like these,  relied on incidental, on-the-job learning rather than close supervision and mentorship, some of which was not feasible because of the general inexperience of the Target Canada staff, but some of that supervision and mentorship not feasible because the company chose to provide less rather than more training, when learners could be observed performing successfully before they return to the workplace.

And some of the informal lessons learned turned out to be how to game the system. In doing so, staff exacerbated an already public and humiliating problem with inventory. As reported in Canadian Business: 

Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper. “They figured out how to game the system,” says a former employee. “They didn’t want to get in trouble and they didn’t really understand the implications.”

Although presented in the magazine as a technology issue, the situation sounds like a classic human resources management and development problem.

By all accounts, despite these problems, Target had a committed and engaged workforce according to the Canadian Business report. But a committed and engaged workforce can only go so far when the system sets that workforce up for failure.

8. Bankruptcy is ugly. It humbles even the great. In bankruptcy, Target violated its own century-old values as a corporation and seriously tarnished its image in the Canadian community. It wrote checks to community organizations just before the bankruptcy that bounced when the community organizations tried to cash the checks within days of the bankruptcy. It laid off nearly 18,000 of its own workers, and cost thousands more their jobs. It ruined suppliers. It raised questions about its own ethics by the choice of bankruptcy statute to use in its filing. The manner in which it tried to get out of its leases further tarnished its reputation and the company found itself in protracted court proceedings over its bankruptcy plan.

In other words, Target lost more than billions of dollars in this failure; it lost a part of its soul, even if most of that news was only covered in Canada and received far less coverage in the USA.

9. Target USA does seem to be recovering. Although the stated reason for departing Canada is that the company saw no path to profitability before 2021, if even then, part of the reason has to be that its US stores needed primary attention. 

Although everyone talks about how lousy the Canadian stores were, the USA stores weren’t so wonderful. Sales were flat. The chic had departed and, even in harsher times, cheap alone wasn’t attracting customers. And with a data breach of massive proportions, the company lost the trust of its customers, too.

Around the time of the Canadian departure, Target executives announced efforts to revitalize the product line and shopping experience. The proof would have to show itself on the showroom floor.

And it is starting to. The housewares section has been reimagined and the displays are impressive. I have seen pictures of a reimagined grocery section, which is supposed to have a strengthened focus on healthier foods. If those pictures of the prototypes eventually appear in the grocery department, that department, too, should show new signs of life.

In other words, closing the Canadian stores to concentrate on the American stores was not only a good business decision, it also appears to be one bearing fruit for Target. (That some post-Canada earnings reports have shown signs of life further supports that decision.)

10. Target does not seem to have learned all of its lessons about international retailing. Although Target got many things wrong when it tried to enter Canada, it did recognize that, at the least, it needed to be culturally sensitive to shoppers in Quebec and made a strident effort to understand its culture. The problem was, Target didn’t understand the local shopping habits and just assumed people would change them, just because Target is Target. Target was wrong.

Similarly, although Target acknowledges that it failed in Canada, it seems to have ignored anything that could have been learned from the experience when the store opened an international website. 

The site allows visitors to shop at Target.com and ship to countries outside the USA. But this international website offers the same value proposition as its Canadian stores—fewer products available at much worse prices.

On the one hand, I doubt many Canadians will shop there. On the other hand, visiting the site and seeing the crappy selection and lousier prices gives us a nice chuckle.

Perhaps that was the point? (Probably not, but just in case…)

ABOUT THE AUTHOR: Montreal-based Saul Carliner is an associate professor at Concordia University, has published widely on training and development and professional communication, and blogs about shopping and museums.  He has been featured in the Globe and Mail, Les Affaires, Montreal Gazette, CBC, Global News, CTV Montreal, and CNBC Asia.

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6 COMMENTS

  1. I can tell you why Target failed… what you stated isn’t correct at all. I was working for Zellers when Target bought them and where already making decisions… long before it was publicized that Target was taking over.

    Afterwards, it was a downward spiral even before the liquidation of the Zellers stores began. They would be telling us no merchandise will be displayed on the floors. They want the aisles bare. The plannograms were taken religiously. If an item is not available, don’t put another item to substitute it’s place. So, for example, you had an x brand of shampoo… but it hasn’t been received in the shipment, but you have another brand, or same brand but instead of for oily hair it’s for dry hair… NOPE. You can’t put it out. It goes back in the stock room. The stock room should’ve been where the people shop as there was more items in there than there was in the entire store. What everyone seen, even when it was Zellers… was empty shelf space. Then when they had visitors (people from head office) they would tell everyone to fill in the holes… meaning put whatever you can to make it look like the store is full… so, yeah! It’s like the people from head office couldn’t tell what was going on… and didn’t care to know.
    When things were on sale. It would not sell much, or was not in stock. Why? There was no skid of bulk items on the floor like you would see at WalMart, or even at a grocery store. It was on a front end display or in the aisle where the product was to be… yes! The two rows 16 inches maximum on a 4 foot shelf. 10 or 12 items tops sold in a matter of minutes. Nobody putting that item out until the night crew comes in… you can imagine the loss. Oh, also, the front end display was cleared… put some totes on there or bags… something big and bulky to fill the space until they have time to replenish stock up again.
    There was no music. You can hear a pin drop and see the employees walking around aimlessly in the stores. They can’t put stock out… there is nothing to put as they can’t fill up the spaces until the shipment arrives… nobody even knew what would be inside the truck. It was a mystery. It was mostly again the same items which where on the shelves. So, in the stock room it goes until one day maybe the item arrived. Most, never did.
    Then, did you notice the cash registers? None had a conveyor. They are just to put a few items on and go…. just like Zellers, they didn’t learn from that either. Same red and white colors. Same carpet… just new vinyl white square tile and gray carpet and yes red shirts and beige pants… instead of the Zellers red and black pants. Oh, no nothing learned at all. People want shining ceramic, sales where they can see it… impulse buys are a norm in every store… not Target!
    Target’s impulse display was $1 plastic items that were worse than Dollarama and you had no use for the things as they were mostly catered to young infant children but the dyes and materials showed warning signs of choking hazaards and lead dyes to those who seen and felt these items.
    Everywhere you looked at Target was a fail… anybody who has retail knowledge would see the simple and extremely easy to see fails… just by walking into the store… it smelled bad, like cheap plastic and rubber, just like Zellers and when Bi Way was around.
    Last… the ads. All music not once the mention of Target. Just a logo at the end of the bizarre commercial that showed nothing that was on sale in the store or for anyone who is not in front of the television set, would not have known what they just seen.
    Fail in all levels of upper management. Upper management who were ex Kmart and Zellers merchandising employees got to screw up even faster when it was Target!
    THAT was the biggest fail ever!

  2. This Target failure was indeed was an epic one..everytime I drive by one of the empty store s I still ponder "what couldve been" it had the propensity to be such a great store but as you article points out , everything went wrong due to the very presumptuous nature of its parent right from the get go .."buuld it and they will come etc " …my pondering soon turns to rage when I consider the relationships ruined from the outset and continued to due during there short time here..suppliers, employees, mall management and this list goes on….so many who left roles at former employers to go to the Promised land that Target promised only to be dissapointed…its really sad on so many levels ..I for one will never set foot in another Target store regardless of country . Good riddance Target

  3. I don’t know why we’re still discussing this a year later. Can’t we just accept the fact that Target left Canada and move on? I’m sure they already did.

    • I’m not sure if landlords with vacant spaces and those struggling after losing their jobs would agree with your sentiment that we should "forget" the biggest retail pull-out in Canadian history, just because you don’t want to hear about it anymore. #Selfish

  4. I was referring to the analysis as to why Target left. I empathize with businesses/retailers who have had to deal with the after effects of Target leaving Canada.

  5. When news of them arriving first came out, I was inundated with people wanting to work for them. As a good neighbour, I reached out to them to say Welcome and where could I send people who wanted to apply. I received a very curt cold reply: Was I looking to be paid for this? If so I should get that out of my mind immediately. Ok..Nice and friendly…..and it got worse. As people were started to apply and be interviewed, I got lots of feedback on how nothing less than a University Degree was acceptable….Well nearly all the senior retail talent in Canada came up through the ranks when that was not part of the landscape. They grew retail in Canada but were told they were not wanted. Instead they favoured the youngest least experienced people simply by virtue of a diploma. The huge number of junior retailers they hired was astounding, while creating a great deal of resentment amongst the talent they really needed to grow a brand new international venture. Add to that 20,000 layoffs from Zellers who were told Target would give them first dibs on jobs at least for an interview but the phone never rant, I can say confidently that their lack of social and human relationship skills predisposed people to dislike them before they even opened one single door.

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