Rarely has a retailer raised consumer expectations so high and dashed them so quickly.
Target Corp. arrived in Canada almost a year ago amid buzz and anticipation that the U.S. discount chain, nicknamed Tar-zhay by some of its fashion-savvy fans, would wow shoppers with chic bargains.
Instead, Target stubbed its toe badly, unable to do the basics of replenishing its store shelves while taking criticism for charging noticeably higher prices than at its U.S. stores.
“It’s a bit of the curse of high expectations,” said Neil Stern, senior partner at retail consultancy McMillanDoolittle in Chicago. “There was so much buildup and drama around Target coming, and it would change the retail landscape. The disappointment was palpable.”
The extent of the damage became clear this week when Target unveiled its grim 2013 results, which included a $941-million (U.S.) operating loss in Canada. It had originally forecast a profit here as early as the fourth quarter of 2013.
In 2014, it anticipates a Canadian loss of $314-million (before interest, taxes, depreciation and amortization). The company says it is fixing its inventory snags, which are leading to empty shelves, and the situation already is improving.
Now comes the hard part: changing consumers’ perception that Target Canada is Target Lite – or worse, that it’s a buffed-up version of Zellers.
“Our goal was to bring the true U.S. Target experience to Canada, which included bringing the brands and products our guests [customers], who have cross-border shopped, know and love – and we have,” Tony Fisher, president of Target Canada, said in an e-mail this week.
It’s not enough for many shoppers, who say they find lower prices in U.S. stores than Canadian stores on identical items – or can’t find the same products at all. The letdown has prompted some to continue to zip down to Targets south of the border, or just ditch the retailer altogether.
“They just don’t have the variety of products here as in the States,” said Sherri Redshaw of Stouffville, Ont., who has been shopping at Target for decades. She will head to Target during a business trip to Indianapolis next month to buy Hershey’s cinnamon baking chips and the chain’s “up & up” migraine medicine for her husband, among other products – merchandise she can’t find at Target in Canada. “I never leave Target in the States without $300 of purchases.”
Heather Arlen of Guelph, Ont., is in Florida right now, stocking up at Target on toys for her grandchildren and more than $50 worth of M&M’s. The retailer south of the border carries seven varieties of the candy, for example, including coconut and peanut butter, while in Canada it has only two, plain and peanut, she said.
“Good grief, I can buy plain M&M’s at the corner store. Why go to Target [in Canada]?”
Fashionistas also see a product gap. Sonia Basu, a graduate student in Kitchener, Ont., said she finds a wider selection of clothing styles at Target across the border, especially now that she’s pregnant and looking for maternity and plus sizes. Target in Canada carries plus sizes, although they are not in a separate section but scattered throughout the apparel racks, and run to XXL rather than XXXL in the U.S., Target spokeswoman Lisa Gibson said.
Mr. Fisher said the perception that Target Canada is missing products is partly because of the troubled but improving supply chain, which has led to noticeable gaps on store shelves. “We remain fully committed to improving in-stocks and delivering a more consistent experience for our guests,” he said.
As well, Target counts on its suppliers to recommend products that Canadian consumers prefer, Ms. Gibson said. “We will adjust our merchandising mix based on feedback we get.”
Food and drug regulations mean that some U.S. products would have to be reformulated for Canada, which has stopped Target – and other retailers here – from carrying some items, she said. For instance, last year it could not bring its Archer Farms Sweet & Spicy Thai-Style Chile Reduced-Fat Kettle Chip here because the seasoning blend contained stevia, which could not be used to sweeten snack foods in Canada at the time. (Ottawa gave the green light to stevia in snack foods in January.)
Still, Target carries more than 90 per cent of the same in-house and designer apparel and home decor lines in its Canadian stores as it stocks in its U.S. outlets, including Nate Berkus homewares and Mossimo fashions, Ms. Gibson said.
But the retailer is at a disadvantage: Its Canadian stores are on average 18-per-cent smaller than those in the United States, forcing the retailer here to carry fewer offerings. Target bought the store leases from ailing Zellers in 2011 in a $1.8-billion deal; it hand-picked more than 120 of the best ones for Target, Mr. Fisher has said.