Target’s Failure in Canada

A net loss of 2 billion. That’s what Target’s mistake ended up costing them. This was supposed to be Target’s big leap to the Great White North and their first attempt at international expansion. However, Target fell short in their quest and withdrew from Canada within two years of its launch. There are many factors that may have attributed to Target’s demise but the main reason why I think they failed was because they had a poorly executed business model for Canada.

TORONTO, ON – FEBRUARY 24: Detail Shots of new Target store at East York Center. Rene Johnston/ Toronto Star (Rene Johnston/Toronto Star via Getty Images)

In 2011, by announcing their purchase of 220 leases from Zeller Inc. for $1.825 billion, Target began their entry into Canada. This move was heralded as genius by many because it saved them both time and money on building their own stores. However, this very move was the main reason why Target never went off in Canada. The locations Target inherited were locations that weren’t frequented by Target’s main customer: the middle class. With bad locations and unappealing stores, Target dug itself into a hole too deep to come out.

By opening so many stores in such a short period of time, Target failed to provide the necessary inventory for the Canadian stores. Shelves ended up being empty and stores were low on products to sell. For customers, there was no incentive to go to a bad location, and buy items that never ended up getting restocked. As this problem persisted, customers found alternatives such as Walmart to satisfy their needs.

If target had gone back to the basics and re-evaluated themselves on the business model canvas, problems that ended up costing them 2 billion dollars could have been avoided. They would have realized that buying the leases off a company that was slowly dying off in Canada would not been in the best interests of the company even though it saved them money in the short run. Additionally, if the operations manager had planned the expansion into Canada better, the issue of shortages would not have been a problem. However, Target didn’t plan the expansion as well as they should have and ended up slinking out of Canada defeated and embarrassed.

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Bibliography

Looking beyond Target | Canadian Grocer. (2016). Canadiangrocer.com. Retrieved 1 October 2016, from http://www.canadiangrocer.com/worth-reading/what-went-wrong-for-target-canada-48093

Wahba, P. (2015). Dumpy locations, empty shelves and poor pricing compared to Wal-Mart doomed Target’s efforts in Canada.. Fortune. Retrieved 1 October 2016, from http://fortune.com/2015/01/15/target-canada-fail/