Dead Stores Walking?
Hard to believe, but there soon may be some strange, zombie-like sightings north of the U.S./Canadian border. No, no, no…these creatures will not take on human-like forms. They will likely appear to be the type of big box stores, which until recently were the envy of American retailing. Lately however, even Walmart has been almost hiding its big box brand by going out of its way to promote the growth of its ‘smaller’ units – the Neighborhood Markets, which are in fact basically right sized supermarkets.
Should they appear, these zombie-like sightings will take the form of relatively newly redesigned and refurbished big box locations which are currently branded as Target Canada. Any number of these sightings would indicate a reversal of fortune for Target Corporation both north and south of the border, which could not have been dreamt of when Target Canada emerged from the drawing board just four years ago and opened its first locations in March 2013.
Of course, bleak early tidings in Canada became foreboding when Target corporate fired Tony Fisher, Target Canada’s first president, in May 2014. Less than three months later, Brian Cornell took over as Target Corporation’s new Chairman of the Board of Directors and CEO. While early, dismal Target Canada results were a strong part of the reasons behind corporate making such a drastic change at the top, certainly the infamous credit card data breach, troubling financials and leaked employee dissent and morale issues were significant issues which were expected urgencies the new CEO/Chairman could dramatically repair.
As to its Canadian operations, Target seemingly spent considerable time and performed a great deal of due diligence to meet a clear Canadian consumer demand to establish a presence north of the border. For years, many Canadians traveled south of their international frontier to shop Target stores in the U.S. Many of these trips were only about an hour from home, but shoppers returned loaded with product and raves about their American shopping experience.
Word spread as Canadian consumers increasingly wondered what prevented Target from opening north of the border years earlier. These questions intensified in scope as Walmart prospered and eagerly expanded in Canada. Target’s preparations for commencing Canadian operations were clearly a response to a popular, pent up consumer demand. This is simply one of the best scenarios on which a company could rely prior to implementing a major investment for a distinct platform of new store openings.
However when Target answered this consumer call, it did so in several perhaps, oddly measured ways. In terms of locating potentially massive real estate holdings for its Canadian store locations, Target corporate took what might be seen as a shortcut. The company acquired the leasehold rights to up to 220 soon-to-be defunct Zellers stores from stately Zeller parent, the Hudson’s Bay Company. At this point Target was seeking to open up to 135 locations in Canada.
The question soon came up as to why Target was concentrating its new Canadian focus exclusively on the locations of a major failed chain. Perhaps a part of Zeller’s failure rested in weak locations.
Critics wondered why Target didn’t opt for a gradual rollout of locations based on geography and demographics. Some preferred using a scheme of opening in one province at a time to better meet community and consumer needs and aspirations.
Likely a bigger factor responsible for Target Canada’s problems is the pronounced disappointment of the Canadian consumers which had long and eagerly anticipated shopping Target on their home turf. As soon as Target’s Canadian stores had opened, word emerged that consumers were extremely disappointed in the product pricing schemes at their new local locations. During the years these shoppers were crossing the border to shop Target, price/value was a key talking point. The resulting buzz drove even more customers across the border and ultimately resulted in the previously mentioned consumer demand to bring Target locations to Canada.
The consumer buzz resulting from the realization that Target Canada’s prices were not nearly as attractive as those at stores across the border stirred up more than disappointment. It had created an almost nationalistic resentment from the company’s new target audience. Television news featured shoppers leaving Target’s new Canadian stores in anger. Viewers could see and hear disgruntled customers expressing severe disappointment as they wondered why American customers across that border were the beneficiaries of a noticeably lower pricing structure.
Some Canadian consumers wondered if higher Canadian prices were now compensating for lower prices in U.S. stores along the border. Other Canadian Target shoppers wondered out loud if it was actually better to shop across the border as they had done for years. Here, of course there was an unmistakable undertone of frustration and resentment.
Additionally there were some costly glitches, confronting Target’s Canadian rollout. Barcodes on products entering the company’s distribution centers did not match corresponding entries in the computer system. Ultimately, corresponding products aggregated in warehouses while store aisles reflected many ghastly holes in missing product. Supply chain errors are never good but these were especially daunting at the startup of the company’s new Canadian operations.
Target Canada’s stunning financial failures and corporate damaging losses have been so staggering and all consuming, that company Chairman and CEO Brian Cornell was on an all-out campaign to right the Target Canada ship for the recent holiday season. Here, nearly forty percent of the items the retailer promoted for this ultra-important holiday season were new to its stores. Target also announced additional exclusives and partnerships with designers, determined to enhance its air of uniqueness in Canada.
The fiscal results of these efforts will be announced shortly. Stunningly, it is now expected that if the Target Canada holiday season financial results continue to appear grim, it is likely the parent company will decide on a future between two paths. One would involve closing the weakest of its Canadian locations. The other option would be shutting Target Canada down and removing all life support. Should the latter tact be implemented, this decision could be announced just prior to the second anniversary of Target Canada’s initial store openings.
Even as recently as eight months ago, when Target fired its first president of Canadian operations and just over five months ago when Brian Cornell came on board to run corporate operations, the latter option was likely unthinkable. Walmart continues to aggressively expand its Canadian operations. How can it be that Target, marching into Canada after years of preparation seemingly to meet a growing and considerable consumer demand, could have failed its startup so miserably that it could give up on this operation so soon after its inception?