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I know because I saw it clearly for myself.
While that may sound harsh, it's the reality of what happened.
Just two years into their expansion north of the border, and billions of dollars later, the chain's closing up shop and taking a big hit.
This should never have happened and it is another blow to an increasingly punch-drunk retailer.
Here's the story behind it and what to do…
A Flawed Strategy and Execution Were the Problems
Before Target came to Canada, Canadians went to Target in search of "cheap chic."
Many recognized their products as somewhat better quality and more stylish than their main competitor, Walmart (NYSE: WMT). Often the prices at the two stores are comparable.
With an estimated 75% of Canadians (myself included) living within 100 miles of the U.S. border, same day shopping trips south are popular, especially when the exchange rate favors a strong dollar. So Target management reasoned that expanding north made perfect sense as they eyed a familiar yet relatively untapped market.
And even if generally correct, they failed on two critical success criteria… strategy and execution.
I remember firsthand the media fanfare that accompanied Target's entry into Canada and when the first stores greeted customers.
We'd gone in on a couple of occasions within the first few weeks. My reaction was the same as others I spoke to soon after: prices were typically higher than in Target's U.S. stores, numerous products available stateside were nowhere to be found, and shortages were common. Barren parking lots in front of Target stores were typical.
I kept wondering what the point was of coming into Canada if they weren't going to give Walmart a run for their money?
Current Chief Executive Officer Brian Cornell admitted as much on Target's blog: "We missed the mark from the beginning by taking on too much too fast." Within the first year, the retailer had opened as many as 100 stores.
But that's not all. Management also misjudged the Canadian consumer.
Especially through online shopping, Canadians were quick to realize they were being gouged when comparing to U.S. prices.
In their defense, Target is not alone in having a tough go up here these days, with even Walmart suffering weakening sales. In recent months, both Sony and Mexx (an Amsterdam-based clothing retailer) announced that they were closing their Canadian retail outlets.
For Target, it's been a costly foray into Canada. Target expects a $5.4 billion Q4 loss thanks to discontinued Canadian operations, and cash costs related to exiting on the order of $500 million to $600 million.
Given that management only expected profitability to be reached by 2021, shuttering operations was probably a wise move.
Target's closures will ultimately see all 133 stores close (it is expected to close all its stores by May) and 17,600 employees looking for new jobs. The company is providing workers with 16 weeks of compensation wages and benefits. Clearly the ethical corporate move for its employees, but a residual cost that will persist once the stores have shuttered.
In hindsight, perhaps the company's biggest misstep was strategic. A few months after the retailer had opened in Canada, I thought to go online and search for an item. Initially, I thought I'd done something wrong. But as it turns out, I didn't; Target did.
The company basically had never set up an online shopping presence in Canada. Instead, its Canadian website consisted of little more than a tool to find the nearest location and show off its latest flyer. I was shocked. What a disappointment given the company's size and the scale of its launch to have overlooked a critical component to supporting a bricks and mortar expansion with an ancillary (and presumably requisite) accompanying online presence.
From start to finish, Target had tripped up both the strategy and execution of its foray into the North. In the United States the company's slogan may be: "Expect More. Pay Less." But up here "Expect Less. Pay More." seems more fitting.
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.