Why did Target fail in Canada? It wasn't the U.S. Target
The collapse of Target in Canada can be partly blamed on the giant retailer neglecting to re-create the U.S. Target, says a business expert.
That is, shoppers expected the same type of store that drew them across the border but what they found was higher prices and a lack of the products they wanted, said Barry Prentice, a professor with the Asper School of Business in Winnipeg.
My surprise is that they're giving up so quickly.- Fang Wan, Asper School of Business
"The service wasn't the same," he said, adding Target maybe misunderstood the Canadian market.
"They may have had signals, based on cross-border shopping, in which they thought, 'Well, all of these Canadians are coming down, they must love us.' And perhaps they thought the Canadian retail [market] must be weak or something wrong if all these Canadians are coming across the border, therefore it would be a cakewalk to come in.
"Things went wrong, obviously."
On Thursday, Target announced it is pulling out of Canada, closing all 133 stores and putting 17,000 employees out of work. It has already filed an application for protection under the Companies’ Creditors Arrangement Act.
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The decision comes less than two years after the first Canadian stores opened in March 2013 in Ontario.
Fang Wan, an associate professor of marketing at the Asper School of Business, says hearing of Target's business woes in Canada does not surprise her.
"My surprise is that they're giving up so quickly," Wan said.
"They just built a lot of the stores and they spent a lot of money. It's such a new expansion, right?"
Stores in Winnipeg, Brandon
Target opened stores in the Kildonan Place and Southdale shopping centres in May 2013, and the Grant Park shopping centre location in November that same year.
The biggest Winnipeg location, a 107,000-square-foot, stand-alone store near the Polo Park Shopping Centre, opened its doors just three months ago.
CBC News reporter Meaghan Ketcheson spoke to a couple of employees on the way into the Polo Park location on Thursday morning. They did not want to be interviewed but said they are shocked.
In addition to the four Winnipeg stores, Target has one other Manitoba location — in Brandon, where the store employs more than 100 people and is the anchor retailer at the Shoppers Mall, the city's main shopping centre.
"That shopping centre, I think, relies on a lot of the foot traffic from that Target store," said Jordan Ludwig of the Brandon Chamber of Commerce.
"I don't know if they have any any plans going forward. We know that it's been kind of a revolving door at that particular location."
Ludwig added that smaller cities like Brandon will be hit harder than others when the Target stores shut down.
"You take 120 to 150 people out of our labour force here in Brandon, Manitoba, a town of 50,000 people — that's a big effect, and it will have ripple effects for our local economy here," he said.
'Decided to cut their losses'
Prentice said the exchange rate changing probably had some impact on why Target's prices were higher in Canada than the U.S. locations, but the Canadian retail market is also competitive, maybe more so than Target thought.
"You have entrenched retailers here and coming in is very expensive to get started and established and they just probably had a hard time making ends meet and therefore it wasn't a profitable thing for them to do," he said.
"So rather than continue to lose money, which I suspect they were doing, they decided to cut their losses and retreat.”
Target lost almost $1 billion in its first year in Canada, and while the losses have shrank since then, the chain is still losing money daily. CEO Brian Cornell stated in a press release Thursday that the Canadian stores were on-track to continue losing money for at least another six years.
Target has hired international consultancy Alvarez & Marsal to oversee the liquidation and wind-down process. The stores will remain open while the company completes the that process.