Toronto Mike

Target Closing All 133 Canadian Stores - Here's What Went Wrong

Target has given up trying to save its Canadian operation. Billions were lost, and now 17,600 jobs will be lost when the 133 Canadian stores are closed for good.

When I heard the news, I immediately thought back to this entry from last May. The comments were incredibly revealing, especially the series from Anonymous who claimed to have inside knowledge of what exactly went wrong.

Here's his/her first comment on that entry:

This is a juicy one. I'm not going to use my name here because I'm the account manager for Target with my company so I just don't want to have to worry about Target searching and finding out just in case. I am however a regular contributor here.
Target was a company that had so much potential in coming up here great brand recognition, more premium clothing and an alternative to Walmart. All the reasons why target does well in the US. Vendors were jumping for joy at the thought of having someone compete head to head with Walmart and steal their share while also taking away some of their bargaining power.
That perhaps was the big problem they thought they could just cookie cutter what they do in the US and do it here. I read the gawker story from a Canadian employee and that about sums it up.
Last year when they grand opened the three stores it was an absolute debachal. Vendors shipped in massive amounts of product into the Target DC's to ensure the store would have stock for the open. What did we find when we entered the stores that opening day? Half our crap wasn't on the shelves. It really didn't matter the category, the results were all the same.
For the vendor community the out of stocks were an absolute horror. Especially as these out of stocks continued for 7 months after. What compounded this was that none of the US brass that was brought in to launch here cared. My buyer flat out told me that none of the Americans that were there trying to guide the ship cared. Every vendor was crying about in stocks and executions of plannograms and nobody there cared. or at least nobody that had power cared. All they kept talking about was the fact their Facebook page was the most liked Retailer page in Canada and that they were opening 124 stores which had never been done before. What made things even worse was that when you had an ad spot on an item, you'd go do a store visit the day the ad broke only to find that they had very little or no product on shelf to cover the ad. can you imagine consumers going to their stores only to find that the item(s) that were on sale had no stock? this only further pissed off the consumer. Sorry let me correct that to Target, all consumers are referred to as guests. You need to remember that because Target themselves will call you out in a meeting if you don't use the term Guest. Ultimately the GUEST was finding out first hand how bad the experience was.
Get past the in stocks you hit all the other road bumps. Firstly they shouldn't have tried to open 124 stores in 7 months. The good news is their original plans called for 150 stores in 7 months so at least they scaled that back. But like anything when it comes to buildings there are delays and things don't quite work out. Despite that the American leaders said we keep on keeping on. Also keep in mind that Target in the US is notorious for setting lofty goals and ending up falling short. This in and of itself should have been foreshadowing to everyone in Canada.
Add to this the extra headaches Target caused vendors. Magically out of nowhere they said they would price match Walmart on like items when Walmart goes on rollback. What this means is Walmart does a 30 day price reduction they call it a rollback. Well Targets audit team will go out see it on Rollback and then lower the price at Target. Which is great in theory, but then they expect vendors to keep their margin whole. All the while not communicating the price drop at shelf.
So while we are on the topic of pricing, this was another funny thing Target did. They just didn't communicate it to consumers well. They tried to be all cloak and daggers when it came to what retails would look like. So it left the people in our population with a lower intelligence to believe prices would be the same. This of course was ridiculous, because Walmarts prices here aren't the same as in the US. It's difficult to be and we all know the reasons why. If Target had of just said we will be competitive with Walmart they'd have done better.
When I say competitive with Walmart I don't mean on everything just like items and especially consumables like Tide, dish detergent, pet food and shampoo. The fact of the matter is Target is slightly higher priced in the US on clothing and general merch, because they don't pull a Walmart and have baby tee's on for $2.00. Target sources well known designers and many in the US clamor over each other to get the exclusive lines that Target realeases. Again none of this was communicated. It could have been and at least the public would have been warned. There still would have been the morons saying things like"where are the prices like in the US?".
Next people talk about assortment. Target for the most part carries nearly all the items Walmart does. I know in my category they are missing 20-30 sku's for a department with thousands of sku's. Problem is they don't have nearly the assortment US targets have. The reason being is Target took over leases on old zellers stores. These old Zellers stores had much much much smaller foot prints than Target was used to in the US, this compounded with the fact that Zellers stores are almost all different in size. Which means they have to literally have 124 different floor plans for stores. Where as Walmart now has the luxury of having cookie cutter shape stores. Again this was poorly thought out by Target, so this automatically lead to a decreased sku count on fashions and general merch that people are used to at Target.
Further to all of this was the difference between Walmart in Canada and Walmart in the US. Many Walmarts in the US are dumps, they might as well be a dingy flea market. The people you see there are even worse than the lowliest people you see in one in Canada. Target is the better looking next level up from a Walmart in the US. Better stores, clean floor policy and most importantly no McDonald's in them. Walmart in Canada while not being a great experience is still vastly superior to that in the US. When Target did arrive, they didn't seem like a gleaming alternative to Walmart, only slightly better. Also their clean store policy which means no displays in Aisle also adds to the cleanliness appearance.
Lastly came Target's ego. They brought in a bunch of Americans here who all drank the Target kool aid. They talked Target, walked Target and really all they knew Target. If you go to the US the Target head office used to be lively. Lots of young people mulling around making Target exciting. Especially because of the sheer size and the overall establishment of the brand. they didn't do that here, what they did do was act like Canadians didn't know. They touted their brand shot down vendor ideas, wasted vendors time and money all the while beating their chests. To the point where 6 months in nobody in the vendor community could take them seriously, but still they thought they were kind. Then the best and worst thing started to happen. The US team went back to the place from which they came. In droves and at this time a mass exodus of Canadian employees started. Especially at the head office. Sales weren't there, vendors were constantly calling, buyers weren't hitting their sales numbers and general feeling for Target had diminished. What this did do was force those left and everyone new to learn the business as it existed today not to where the US does. Since that time, I can honestly say Target has improved in stocks. Vandors at least aren't complaining the same way anymore. Venture into any store today and you can see the turn around happening. The problem is they have tarnished their reputation horribly. Their Canadian president should have been fired 6 months ago. So it was only matter of time before that happened. The bad news is many loblaws folk are transitioning over to Target. If anyone has had any dealing with Loblaws then you know why that might be a problem.
I could go on, but I think many of the touch points have already been hit right on the head. I need to emphasize two things. firstly Target didn't buy Zellers. They bought the leases to all the Zellers stores. Nobody was shopping at Zellers and from the vendor side of things, that's where products went to die. So to all those saying another American retailer killed a Canadian business I say shut up. HBC was bought out a long time ago by an american, so it isn't truly Canadian anymore.
Second Target won't disappear. Too much money has been invested for them to do so. If they did it would hurt their plans for further global growth. the US is saturated and much like Walmart they are having to seek out business in other markets. Any rumors they are leaving is just playing the sky is falling card and trying to sell some news.
The only good thing you can say is this. If you do go into a store now, they are pretty much empty of "GUESTS". With in stocks improving it means you can go in there and get out quickly without having to deal with some of the human scum gracing the presence of Walmarts. Oh and most of them have a starbucks in them so at least you can grab that on your way in or out. Their prices aren't higher than Walmart, in fact because they price match rollbacks all the time and sometimes forget to take the price up they are at times cheaper. Compare a same basket if you want to see. Also Target ad matches any other retailer out there on like items, so if you see it cheaper somewhere else just bring in the ad and they'll match it.
Hopefully that gives some further perspective. Phew sorry for writing so much.

But wait, there's more:

Some further points to elaborate on and perhaps it will be in better English with proper grammar and all.
When Target bought all the leases for nearly 300 stores they didn't plan on keeping all of them. For the 124 stores they opened up last year then spent anywhere from 10-15 million a store on to renovate. When I say renovate they might as well have blown up the old stores and started new. They had to take each zeller back to the studs and start all over again. They hadn't anticipated this and in some cases it would have been near on impossible to know.
They sold nearly 50 locations to Walmart. I know it sounds weird but they made a good penny on the deal there. Walmart decided we don't need to renovate right away. So they just took down the Zellers signs and put up Walmart ones. Similar to what they did when they first bought Woolco all those years ago. The intent is a slow renovation to new stores or super stores in the coming years.
What you will see now from Target is new stores being built from the ground up. Their very first store from the ground up opened recently in Toronto at the stockyards. It's a nice store and really what a Target should look like. I think the most impressive will be the expansive store they have planned in downtown Toronto for 2016.
The spaces that used to have Zellers that have nothing in them, doesn't mean they will remain that way. Some are slated to open in the next couple of years while others may never open again. This is really the result of how they've had to cut back on expansion plans.
For those that still have sympathy for Zellers there are many horror stories in the vendor world. The last 3 years they were here before they had sold leases to Target were scary. Many times they couldn't pay their bills for months and months at a time. There were vendors that had to cut Zellers off altogether because they couldn't extend anymore credit to them. They had infestation problems abound in the store. I have a friend who works for coke and when they did there direct to store shipping they used to throw out cases and cases and cases of expired pop. That's how little traffic Zellers had. Their stock rooms were a mess, and their inventory system was abysmal, but enough about Zellers. I understand the Canadian icon and what it meant at one point in time, but at the end it was in it's death throws.
One thing to point out or ponder is whoever thought that Zellers bought more Canadian than Target. Target has gone out of it's way to partner with roots, they had a contest for a Quebec designer for clothing lines. They have sought out unique Canadian vendors for boutique items. Zellers may have had more Canadian items on the shelves, but only because those items had been there for 30 years and still hadn't sold.
Something most of the public doesn't know and what lead to so much stress is that Target Canada runs it's operating system on SAP. Whereas in the US they have their own proprietary software. Anyone who has worked at a company that has gone through an SAP implementation knows it's full of issues and that bugs create havoc for almost a year. Can you imagine having a US team saying this is how we do things and then not knowing how to actually do it here because the systems were completely different.
I had to create over 200 items on an excel spreadsheet all the UPC info, dimensions, cost, cot retail, weight everything a regular retailer needs. Unfortunately the excel spreadsheets were designed in a vacuum, and no one checked to see if they would link up into SAP. After spending hours upon hours creating every item it was devastating to find that after they opened nothing was designed right. UPC's for the scannable item were mismatched, dimensions were wrong so it caused shipping problem. Then again hours upon hours fixing the issues so that they could even place more orders.
Second to this system implementation was the problem of having French as a second language and needing to have everything created in multi-language format. The US doesn't have to deal with that, and that took everyone by surprise from the US. There was one meeting in where I had to do everything in my power to not let my jaw drop. This of course created more problems in their system.
Target's investment here was nothing short of massive. Outside of the stores they had to rebuild inside, they built three state of the art distribution centres. For anyone that has been in one they are quite the sight. They have the capacity to handle 300 stores and then some. I believe they were built so that they could roll out their P-Fresh concept. This is a store type they have in the US that is essentially a Walmart superstore but slightly smaller. Meaning they would have a full grocery store inside to help drive grocery essential traffic. So in turn their warehouses would need to be able to handle fresh, frozen and refrigerated product.
Targets main problem here is one they suffer from in the US. They are great at selling fashion and many times consider themselves a fashion retailer first and a general merch second. They win tonnes of awards for their marketing. The problem is people don't buy clothes weekly, bi-weekly or in most cases even monthly. So when you have that issue in the US and you come here and have no stock you are DOA.
One more big problem is that they didn't warehouse their grocery items they signed a deal with Sobeys to distribute and warehouse their grocery items. This was the one thing Sobeys at least had humility in by realizing they didn't have the capacity to handle that as well in the first year. Problem that arose here is that Sobeys short shipped them, weren't on time with delivery's and a plethora of other problems that forced Target to be even worse on that precious grocery traffic. I know this deal wasn't meant to last forever and their three DC's were built to handle full grocery. So once they get that under control it will be better.
Lastly is ordering efficiency. I remember calls from my warehouse with someone screaming had I seen the latest PO. Target was sending out trucks and submitting orders with only one case on it. This of course was incredibly inefficient for Target to spend that much sending a truck out, but also results in something called case pick. When a retailer orders lots of small amounts of things it increases case pick. Meaning someone has to manually load the pallet and make sure it stacks well. When they order a lot of one item it means a full pallet can be made with one item. This can be done by a palletizing machine. It's easy to put together and easy to ship. Target had and continues to have massive case pick, yet another issue of low traffic and improperly trained personnel and no care from the top brass.
I think that covers nearly everything.
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