Target Corp. is struggling with a problem that few retailers face: too much demand for too little inventory, risking dampening customers’ enthusiasm as the U.S. discounter gets ready to open a new wave of stores.
Target will open an additional 17 stores on Tuesday, after having launched its first three Canadian outlets two weeks ago, but it hasn’t been able to keep its shelves stocked as shoppers flocked to its stores.
“We definitely were slammed,” said John Morioka, senior vice-president of merchandising at Target Canada. “We thought there would be an initial bump. The bump has not levelled off to the degree that we thought.”
Some retailers, such as technology giant Apple Inc. and yoga wear phenomenon Lululemon Atheltica Inc., keep supplies of certain products deliberately scarce to keep customers coming back. Target stocks limited-edition lines of affordable designer collections, such as last year’s styles by Jason Wu, to entice shoppers to its stores and get them buying other products.
Nevertheless, the retailer said its Canadian inventory shortages weren’t by design but rather as a result of unexpectedly high demand. With 124 outlets planned for Canada by the end of the year, the American chain is betting it will be able to replenish its shelves with enough of the basics – from milk to mittens – to ensure customers don’t flee to rivals.
“In-stock positions remain a challenge, particularly following a very busy weekend,” Mark Petrie, a retail analyst at CIBC World Markets, said after a visit last week to Target’s test store in Guelph, Ont. “The store was crawling with employees stocking shelves.”
Yet, even with empty shelves, Target already is making “a strong impression with customers in every market it enters,” Mr. Petrie said.
Mark Satov of retail specialist Satov Consultants said Target has created such a huge buzz through social media and word-of-mouth that “everybody is dying to try the store.”
Target has a “military-like” focus on planning and will inevitably get the replenishment right once it understands market demand, he added.
Target grappled with keeping such items as milk – a top seller – and apparel on its shelves in its first two weeks, Mr. Morioka said on Monday. The 24 stores opening this month in Ontario – four more will roll out on March 28 – are pilot outlets to let the company test the Canadian waters. It will formally launch the stores in early April.
Still, it has had to wrestle with Facebook and Twitter postings from people complaining about empty shelves and high prices.
“We opened them probably a little earlier than we would have thought typically,” Mr. Morioka said, after leading a media tour of a Toronto store opening on Tuesday. “We’ll be better prepared for these store openings. But I won’t guarantee anything, as the response has been overwhelmingly positive.”
The company has already made changes to its replenishment systems and is starting to get its goods from trucks to store floors more accurately, he said. For example, it is having milk shipped to stores more often, spokeswoman Lisa Gibson said.
Mr. Morioka said opening more stores will bring “a bit of relief” to the first three outlets, evening out customer demands. He also said the new wave of stores will handle checkouts more smoothly. Target cross-trains store staff in different areas, including the cash register, so that they can be assigned to the checkout when crowds thicken, Ms. Gibson said. If more than a couple of people are in line, another lane is opened, she said.
Mr. Morioka said some prices are higher in Canada because of steeper labour and transportation rates and fewer economies of scale, but Target will be competitive within the domestic marketplace. Other prices, such as those of the upcoming limited-edition clothing line of celebrity stylist Kate Young, will be at par with those south of the border, he said.
The limited-time Canadian Roots athletics wear collection, meanwhile, may sell out sooner than Target expected, he added. “Based on what I’ve seen so far, it’s going to be very limited. I think it’s going to not last as long as we thought it could last.” Its Roots hoodies, for instance – at $34.99 – are less than half the price of those in regular Roots stores, Target executives have said.
As for some negative postings about Target on social media, “we pay attention to all those comments,” he said. “We want guest feedback. … We’ll take the good with the bad and we’ll continuously improve.”