Its entry forced other major retailers, including Wal-Mart and Loblaws, to become better and more efficient
As many Canadian retailing incumbents celebrate the closing of over 130 stores Target nationwide, some wonder what’s next for the retail industry in Canada, and not just in food.
Target’s venture into Canada was nothing short of a fiasco. In terms of food retailing, the American based company was never even close to being a contender; for example, Target Canada was the only food retailer not to offer significant discounts during October for specifically Thanksgiving-related products. Based on its marketing material, it appeared that the company did not know that Thanksgiving is celebrated earlier here. There were many other misses along the way, even though it was committed to offering the lowest price possible to consumers.
However, one major ongoing problem for Target Canada was simply consistent, and consistently damaging, bad press due to empty store shelves and higher price points compared to the U.S. It was always difficult, but possible, to recover yet, in the end, Target Canada likely felt that its brand image was harmed beyond repair.
In hindsight, Target’s failure in Canada is surprising, given its brand pedigree in the U.S. It remains a challenge to the retailer to successfully compete against Wal-Mart. Two years on, the company’s failure to establish itself in Canada gives its critics good reason to believe that its first attempt at moving outside its borders was fundamentally flawed.
Cultural adaptation was tricky, as it got too big, too quickly. By contrast, Wal-Mart’s entry into Canada after their acquisition of Woolco was careful and incremental, as opposed to Target’s swift invasion.
But ignorance is more likely to blame in this case, not arrogance or strategic myopia. The lesson seems to be more about a mix of blind enthusiasm and skewed assumptions. The value proposition for American consumers seemed to have been clearly laid out for quite some time, but this was never the case in Canada. Canadian consumers are too smart to buy into a bad deal, and that is all what Target Canada was offering. In food, its deal was simply pathetic and the experience was distinctly underwhelming.
Ironically, Target Canada’s legacy will be defined by its entry and not by its exit. The very announcement that the company intended to open numerous stores in such a short period of time compelled many other major retailers, including Wal-Mart and Loblaws, to become better and more efficient. For that reason alone, Canadian consumers are the main beneficiaries of the Target Canada caper.
The aggregate quality in the food industry for Canadians is, at the very least, better than two years ago. While it is difficult to know what the future holds for food consumers in our county, rest assured something else will arrive to compel companies to further improve themselves.
In effect, Target paid $5 billion to learn that Canada is not America. It is an expensive experience, but in all likelihood the company will learn from this experience. At the very least, paying close attention to local idiosyncrasies when looking at markets abroad is increasingly becoming a significant conditional factor for a successful entry.
By Sylvain Charlebois
Dr. Sylvain Charlebois is Professor of Food Distribution and Policy at the University of Guelph’s College of Business and Economics.