In January 2011, retail giant Target announced it was opening 124 stores in Canada. By April 2015, Target closed its last Canadian store. In its brief existence, Target Canada suffered losses of over $2B, left thousands unemployed and created enduring memories of empty shelves, high prices and disappointed customers. What went so horribly wrong?
Target’s vision was to replicate the shopping experience of its U.S. customers in Canada by delivering low prices, abundant selection and above average merchandise quality. To implement its vision, Target wanted to establish its market presence quickly by opening 124 stores and three distribution centers within 27 months. This ambitious schedule, however, relied on some critical and untested assumptions.
Possessing a very efficient inventory management system for their U.S. operations, Target tried using this same program to manage its Canadian supply chain. Unfortunately, the software did not accept Canadian dollar values, the Metric system or French (Canada’ s other official language) and had to be abandoned. In its place, Target bought another inventory tracking software that proved extremely difficult to use. Users had to complete up to 80 fields for each of Target’s 75,000 products and it required approximately 3-5 years of training to achieve proficiency.
Lack of training causes errors
Pressured by the ambitious store-opening deadline, Target Canada’s employees were only given a few weeks’ training on the new software. The lack of training meant Target’s inventory data contained thousands of errors. These errors contributed to orders being backed up at the distribution centers, incorrect pricing, items appearing to be in stock when shelves were actually empty and payments not being processed.
Empty shelves? Staff cuts!
When stores began opening, eager customers experienced the full impact of these mistakes. Staple items such as milk and eggs were often out of stock and shelves were frequently empty. Prices were higher than the U.S. shopping experience customers were expecting, compounded by low customer service levels. Target’s management underestimated the costs of doing business in Canada and reacted by cutting store staff up to 40%. The remaining workers faced employment uncertainty, increased workloads and had to deal with mismatched inventory and stocking issues daily. Morale inevitably declined, absenteeism increased and customers stopped showing up.
The company released an “apology video” in July 2014 but by then, consumers were no longer buying Target’s promise of quality goods at a low price. Target sought creditor protection in early 2015, let go the remaining 17,600 employees when its inventory was depleted and closed its last store in April 2015. Ironically, store closures were one of the few things the company did ahead of schedule.
Missed the Target
Target’s disastrous foray into the Canadian market was caused by an inflexible adherence to one approach. Target’s wanted to duplicate its successful U.S.-based retail strategy in Canada by selling a large volume of higher value goods at reduced prices. Unfortunately, this vision did not account for the increased costs of doing business in Canada, lower retail volumes or an existing competitive landscape. Target tried using its existing inventory software without knowing its international limitations. Intent on implementing an ambitious store-opening schedule, Target ignored employees’ training needs and never established an effective inventory management system. Victims of “you can’t sell what you don’t have”, employees were terminated until few committed workers remained. A flawed and poorly executed vision missed the target completely.
Target Canada is a cautionary tale for all organizations venturing into new markets or just trying to stay solvent in existing ones. Here are the lessons we can draw from Target Canada’s failure:
1) Create a shared vision: Target wanted to bring its formula for success into Canada. Instead of sharing and modifying this vision based on local employee feedback, management arrogantly stuck with a flawed strategy alienating customers and their new workforce
2) Test your assumptions: History is replete with failures based on false assumptions. Target assumed its inventory management system would work in Canada. It didn’t.
3) Ensure your employees are ready: Have you ever walked into a Starbucks where the barista didn’t know how to make a latte? Your employees should be sufficiently trained to satisfy even the most demanding customer (internal or external). Otherwise, don’t open the doors yet.
4) Listen to your Change Managers: Change managers are finely tuned to stakeholder issues. Listen to what your most concerned advocates are saying and use this information to improve overall performance.