U.S. discounter Target Corp. saw its overall results pulled down by a tougher-than-expected entry into the Canadian market, the company’s first foray outside its borders.
Here are a few reasons they fell short:
1. A steeper than expected learning curve in Canada
Target senior executives say their initial assessments of the Canadian market and customer habits were off.
Shoppers north of the border, for example, don’t share (to the same extent) the American habit of going to just one store to buy goods in a variety of different categories, everything from apparel and appliances to food and drugs.
2. Disappointed shoppers
Canadians, especially those who had already shopped at Target stores in the U.S., anticipated the same low prices as south of the border. They were less than receptive when they found out that prices in the newly opened Target Canada outlets were higher than in the U.S. Target management says prices at Canadian locations are in line with those of rivals like Wal-Mart Canada Corp..
3. Difficulties finding the right balance in the supply of merchandise
Target Canada overstocked in some areas but experienced a lack of inventory in others, resulting in a serious imbalance. There were empty shelves for some items because of the chain’s inability to meet high demand, while excess inventory elsewhere resulted in major clearance sales. Target Corp. CEO Gregg Steinhafel says the company has the problem under control and that it won’t recur going into 2014.
4. Fiercer-than-anticipated competition
Not to be caught short by the new kid on the block, archrival Wal-Mart Stores Inc. moved to expand its number of stores in Canada, cut prices and push further into food. Other players such as Loblaw Cos. Ltd., Shoppers Drug Mart Corp. and Metro Inc. also stepped up their game.
5. The high cost of entry
The cost of rolling out 124 new stores hurt more than it should have in the context of sales that failed to attain the goals the company had set out.