Nobody wanted to be the one to say,
"This is a disaster",
an anonymous executive told Canadian business as Target
pulled out of the country in 2015 after just two years.
But it was.
The media called it a spectacular failure and a case study in what not to do.
Target lost billions of dollars,
had to lay off 18,000 people and close 133 stores.
But Target in the US is hugely successful worth $70 billion and with 2,000 stores.
So where did they go wrong?
[MUSIC] Things were going downhill before they even started.
In 2011, Target bought the now-defunct Canadian discount chain Zellers for $1.8 billion.
That was a lot of money for stores that were reported to be dumpy,
poorly configured for Target's big box layout and an area's
not frequented by the middle-class customers, Target coveted.
They diminished people's image of what Target was.
They should have done fewer stores but better stores.
The image of Target is that of
a discount chain but a higher-quality one than say Walmart.
Tar-jay is the place to go for cheap chic products
you wouldn't be able to find at the lowest of the low discount chains.
Target was started in 1962 and the chain grew to be worth around $100 billion today.
It was incredibly profitable but Target Canada wasn't.
Under the most optimistic scenario,
the earliest it would've turned a profit was 2021,
eight years after their launch.
Target Exec's didn't want to wait for the money to roll in.
And that impatience was actually the reason why they failed.
When Target bought Zellers in 2011,
the Target Canada team was put on a short timetable.
They had just two years to launch
the 100 something stores which included creating new supply chains,
getting entirely new software, and inventory planning.
Led by the 38-year-old Tony Fisher,
who had only a background in merchandising,
they were rushing headfirst into a 2013 launch.
But when it came,
customers complained of poorly stocked shelves
and an assortment that differed from the US's supply.
And often, higher prices than in the US.
The new software that had been hailed as
the future of store organization, couldn't keep up.
It would say that it's store was fully stocked when it actually had almost nothing.
It got so bad that Fisher decreed that
every warehouse in-store should catalog their inventory by
hand which took a lot longer but at
least it was accurate and the internal problems were just beginning.
VisionCritical, a customer intelligence company,
surveyed over 1500 Canadians on their thoughts about Target.
They found that 70 percent of Target shoppers in Canada,
have also shopped at the company's US stores but
40 percent of those shoppers said that the experience in Target Canada,
was not as good as their experience in the US.
The real kicker, 89 percent of
Canadians thought that Target didn't live up to its tagline,
"Expect more, pay less."
That's partially because Target found itself competing with Walmart in a price war.
Walmart Canada did what Walmart does,
it started a price war with Target.
"You just can't beat Walmart at
their own game and they want you to try", Doug Stephen said.
Walmart had been in Canada since 1994.
They got aggressive with their pricing to protect
their hard-fought Canadian turf according to Canadian business.
It was a perfect storm.
The combination of empty shelves, high prices,
and customers that felt unappreciated left Target unprofitable and losing money fast.
"The negative guest's sentiment became too much to overcome",
Brian Cornell, Target's CEO admit it.
That's why just two years after their first store opened,
they withdrew from Canada.
They filed a company's creditors arrangement act and took a multi-billion dollar loss.
The lesson, first impressions are everything.
[MUSIC] Thank you to
all the commenters who recommended this topic to us in the comments of my last video.
Let me know what other companies you want me to look at
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Thanks. [MUSIC]