Target Canada

Target Canada was the Canadian retail subsidiary of the United States-based Target Corporation. It was created as part of Target’s first large-scale international expansion and was built primarily through the acquisition of leases associated with the Zellers chain, formerly owned by the Hudson’s Bay Company. Target announced the transaction in January 2011, agreeing to purchase leases for up to 220 Canadian stores for approximately C$1.825 billion. Target did not acquire Zellers as an operating business; instead, selected properties were closed, renovated and converted into Target stores, while other acquired locations were sold or transferred to competitors and other retailers. The expansion was unusually rapid. Target planned to open more than 100 stores in a short period, establish Canadian distribution infrastructure, hire approximately 27,000 employees and introduce an assortment modeled on its American stores. The first three Canadian locations opened in Ontario on March 5, 2013, in Guelph, Fergus and Milton. Additional openings followed throughout 2013 and 2014, eventually producing a network of 133 stores across Canada. The stores sold apparel, home goods, food, health and beauty merchandise, electronics and other general merchandise. Many locations also contained smaller Starbucks outlets, and the chain temporarily carried products from Canadian clothing company Roots. Sobeys supplied food and grocery merchandise. Target Canada’s launch was initially popular, but the operation soon encountered serious execution and strategic problems. Its supply chain and inventory systems were not ready for the scale and timing of the rollout. A new SAP inventory system contributed to inaccurate demand planning and uneven replenishment, leaving some stores with empty shelves or merchandise that did not match local demand. Store teams lacked sufficient time to stabilize the system before opening, while the parent company proceeded with the schedule partly because it wanted to avoid continuing rent payments on unopened locations. The Canadian stores also failed to reproduce the value proposition that many shoppers associated with Target in the United States. Prices were generally higher because of transportation, distribution, labor, duties, taxes and other market differences. Canadian customers who had crossed the border to shop at American Target stores therefore entered the new locations with particularly high expectations. Target’s assortment was often viewed as attractive, but customers and analysts criticized pricing, limited selection and inconsistent availability. The company also underestimated the strength of established Canadian retailers, including Walmart Canada, Loblaws, Shoppers Drug Mart and Canadian Tire. Rather than consolidating routine purchases at Target, many Canadian shoppers continued to divide their spending among specialized retailers and grocery chains. The losses accumulated quickly. Target Corporation reported that the Canadian business had lost approximately US$2.1 billion over its lifespan. Leadership changes followed at both the parent and subsidiary levels. Parent-company chief executive Gregg Steinhafel left in 2014, and Target Canada president Tony Fisher was replaced by Mark Schindele. Brian Cornell, who succeeded Steinhafel, reviewed the Canadian operation and supported an exit after its performance failed to improve sufficiently. On January 15, 2015, Target Canada sought protection under Canada’s Companies’ Creditors Arrangement Act and announced that all 133 stores would close. Liquidation sales took place during the following months, and the final stores shut on April 12, 2015. Planned locations in Toronto and Ottawa were cancelled. Target Canada is widely regarded as an unsuccessful international retail expansion, illustrating the risks of aggressive store growth, inadequate supply-chain preparation, weak localization and a mismatch between consumer expectations and actual pricing.

Target had faced speculation about entering Canada for years before making a formal commitment. The company sought to secure Canadian rights to the Target name because unrelated businesses had previously used similar marks. A notable conflict involved Fairweather’s Target Apparel trademark, which was resolved in 2012 when Fairweather agreed to discontinue the name. The decisive step came in January 2011, when Target agreed to purchase leases for up to 220 Zellers stores from the Hudson’s Bay Company. This was a lease transaction rather than an acquisition of Zellers’ operating company. Target selected properties for conversion, while many other sites were sold or made available to different retailers. The conversion program involved extensive renovations, new distribution facilities and a major recruitment effort. Former Zellers employees were required to reapply, and labor representatives criticized the limited guarantee of continued employment. Target announced 127 stores for its initial Canadian network. The first three opened on March 5, 2013, followed by successive waves across Ontario, western Canada, Quebec and the Atlantic provinces. By January 2015, the chain had 133 locations. The stores were designed to resemble the American Target format and offered apparel, home merchandise, food, health and beauty products, electronics and other general merchandise. Starbucks kiosks appeared in many stores, and Roots products were sold for a period. The launch suffered from operational problems. Target used a new SAP inventory platform and opened stores before its Canadian logistics and replenishment processes had been fully tested. The company’s decision not to delay the rollout created stock shortages, empty shelves and assortment errors. Individual stores also had limited authority to adjust merchandise to local demand. In Windsor, for example, stores reportedly carried Toronto sports apparel despite the area’s close connection to Detroit. Pricing and localization compounded the supply-chain problems. Target Canada’s costs were higher than those of its United States stores because of distribution, transportation, duties, taxes and other Canadian operating conditions. Consumers nevertheless compared the new stores with American Target locations and expected comparable value. Established competitors, particularly Walmart Canada and large grocery and drugstore chains, were better positioned for frequent household shopping. Target’s attractive discretionary assortment did not compensate for its higher prices, inconsistent availability and limited understanding of Canadian shopping patterns. After disappointing results, Target changed leadership. Gregg Steinhafel left as Target Corporation chief executive in 2014, and Tony Fisher was replaced as president of Target Canada by Mark Schindele. Although some inventory problems improved, the Canadian operation continued to produce heavy losses. Brian Cornell, who became Target’s chief executive in 2014, concluded that the business was not on a credible path to profitability. On January 15, 2015, Target Canada entered court-supervised restructuring under the Companies’ Creditors Arrangement Act and announced the closure of its entire store network. Liquidation sales continued through the spring, and the last stores closed on April 12, 2015. The Canadian venture’s rapid launch, poor inventory execution, weak price competitiveness and inadequate market localization made it a frequently cited example of failed international retail expansion.

• 2015

  Restructuring and closure

  [1]Target Canadaen.wikipedia.org

  Target Canada entered CCAA proceedings in January and closed its final stores in April.

• 2014

  Leadership transition

  [1]Target Canadaen.wikipedia.org

  Gregg Steinhafel left Target Corporation, and Tony Fisher was replaced by Mark Schindele at Target Canada.

• 2013

  First Canadian stores open

  [1]Target Canadaen.wikipedia.org

  The first three Target Canada stores opened in Ontario on March 5.

• 2012

  Target Apparel name dispute is settled

  [1]Target Canadaen.wikipedia.org

  Fairweather agreed to stop using the Target Apparel name, clearing a major Canadian trademark obstacle.

• 2011

  Target acquires Zellers lease rights

  [1]Target Canadaen.wikipedia.org

  Target announced an agreement to purchase leases for up to 220 Zellers locations for approximately C$1.825 billion.

A modern, design-oriented discount department store intended to bring Target’s American general-merchandise experience to Canadian shoppers.

• Discount department-store assortment · 2013

  Target Canada general merchandise

  The core assortment combined apparel, home furnishings, seasonal goods, electronics, health and beauty products, food and other everyday merchandise. The format was intended to resemble Target’s United States stores, but Canadian inventory and pricing differed because of local sourcing, distribution, regulatory and market conditions.

• In-store café · 2013

  Starbucks in Target Canada

  Many Canadian Target stores included smaller Starbucks outlets, extending the American store experience into the Canadian format.

• Apparel and lifestyle goods · 2013

  Roots merchandise

  Target Canada temporarily carried products from Roots, a recognizable Canadian clothing and lifestyle brand, as part of its localized assortment.

• 2015

  Exit the Canadian marketStrategy

  Background

  The Canadian subsidiary had accumulated losses and failed to reach a sustainable operating position despite efforts to improve inventory execution.

  Action taken

  Target Canada sought CCAA protection and announced the closure of all stores.

  Aftermath

  All locations were liquidated and the final stores closed on April 12, 2015.

  Cumulative operating losses. Approximately US$2.1 billion (Target Canada lifespan, reported at closure)

  Source

• 2013

  Launch the Canadian Target store formatProduct launch

  Background

  Target sought to transfer its United States discount-department-store proposition to Canada through a large, coordinated opening program.

  Action taken

  It opened stores in successive waves, reaching 133 locations by January 2015.

  Aftermath

  The rollout exposed supply-chain, inventory, pricing and localization weaknesses before the network could establish repeat traffic.

  • Walmart Canada — Walmart Canada remained a major price competitor and was frequently compared with Target by analysts and shoppers.

  Source

• 2011

  Acquire Zellers property leasesM&A

  Background

  Target wanted a rapid nationwide entry into Canada without buying and operating the Zellers retail business itself.

  Action taken

  It agreed to acquire leases for up to 220 Zellers locations and convert selected sites into Target stores.

  Aftermath

  The transaction enabled rapid expansion but produced a geographically broad store network that was costly to renovate and supply.

  Lease acquisition price. C$1.825 billion (2011 announcement)

  Source

1. 1Target Canadaen.wikipedia.org