Target Canada Co. is betting on its top stores to become a model for the struggling discounter in its recovery efforts.
Mark Schindele, president of the Canadian chain since May, is overseeing the launch of an array of practices from speeding up and sharpening store inventory stocking from trailer trucks (in Target lingo, "coming clean on trailers") to creating a service culture among staff to go the extra mile and convince shoppers to buy (internally dubbed "the vibe").
The chain is quietly experimenting with ordering more merchandise than its systems think it needs for five of its best performing stores while "over-investing" in strong selling inventory at its top 20 outlets, Mr. Schindele said during a tour of Target's Toronto Stockyards mall location, one of its premier stores.
In a program it internally calls "how high is high," it is assessing how much business its best five stores can generate amid efforts to fix its problems, especially empty shelves and high prices.
"We've seen measurable improvements," Mr. Schindele said. But he still has work to do, he asserted. In some important aisles, such as higher-margin fashions which Target is known for, "we're still stumbling."
As the retailer heads into the key holiday season, it is borrowing a page from its U.S. parent's playbook, counting on practices that helped Target Corp. become an affordable style leader.
Now the stakes are higher than ever in Canada, as the retailer's new leaders roll out their turnaround strategies amid stiffer competition and troubles at the U.S. home base, including fallout from last year's data breach.
In Canada, Target is trying to keep shelves replenished by giving employees six hours to unload trailer trucks and stock stores and back rooms accurately in a program internally referred to as "coming clean on trailers."
It is setting up "green zones" to ensure employees keep products in the right place and neatly folded by size and style and "4X4" processes to instruct staff to check every two weeks that each four-foot section of the store is in order, with shelves and pegs filled to capacity, correct signs and clean racks. It launched its "98 per cent accuracy" goal of making sure back rooms are 98 per cent stocked to keep track of the quantity of each item.
And it is empowering its employees. The initiatives entail such simple matters as asking shoppers: "Can I help you find something?" and engaging them in conversation to sway them to make purchases they might not have otherwise made, creating a "vibe moment."
But while Mr. Schindele said he's making progress in stocking sections such as beauty and health goods, household staples, toys and electronics – and making big bets on coats and sleepwear – he still grapples with bare shelves in many shoe, handbag and home storage aisles.
"The bareness of the shelves is the problem," said shopper Tessa Schmitz, 33, and mother of two, as she strolled the aisles. "There are huge holes."
Just back from two years in New Orleans, she notices a stark difference between the wider offerings in U.S. Target stores. For example, she regularly bought Honest Kids organic juice for her three-year-old son at American Target outlets but can't find the product here.
Andrew Kennedy, 30, headed to Target on the weekend for a $279 Eddie Bauer stroller/car but the store was out of stock. He instead bought an Evenflo alternative that was about $40 cheaper. But he and others agreed they'd still give Target another shot for everything from Halloween treats to baby items.
Kathleen Phillips, 35, was looking for an adhesive wallpaper she had seen at Target.com but it wasn't at Target in Canada, which has no e-commerce. She picked up curtains and a light shade instead. "So far so good."
"I think it's improved," added Kate Hanley, 54, as she packed her cart with about $250 worth of carpets and other home goods. "But it's still not as good as Target in the States."
Industry watchers also have noticed better-stocked shelves and competitive prices at Target, despite ongoing challenges. "They need to make it cool in Canada," said Alex Arifuzzaman, partner at retail-real estate specialist InterStratics Consultants. "That's the reputation they had before they came here. They kind of lost it or it got diluted."
Even so, analyst Perry Caicco at CIBC World Markets sees "few examples of remarkable improvements." He predicts Target could be gone by the end of 2015 and that savvier rivals, including discounter Wal-Mart Canada Corp., grocer Loblaw Cos. Ltd. or Hudson's Bay Co., may consider buying its assets. (HBC paved the way for Target to enter Canada in 2011 by selling most of its Zellers leases to the U.S. chain.)
Mr. Schindele, wearing a Target badge bearing his first name, insists the chain is finally focusing on implementing best operational practices after moving too fast to launch 124 stores here in 2013. It now has nine more.
In its current third quarter, Target Canada's shopper traffic to stores improved from its second quarter, he said, declining to provide figures until the company reports third-quarter results on Nov. 19. It lost nearly $1-billion (U.S.) in 2013 and, in the first half of fiscal 2014, its operating loss grew 11 per cent to $415-million while sales rose 133 per cent to $842-million. In its second quarter, same-store sales at outlets open a year – an important retail metric – fell 11.4 per cent.
Mr. Schindele said he's making progress in categories in which Target can better predict sales trends and merchandise is ordered domestically rather than overseas, which can take up to nine months or more. Now the retailer is counting on departments such as toys, electronics and entertainment items to make it a holiday "gifting destination."
But in the fashion aisles, the retailer is still faltering. "If our estimate of how things will sell is wrong, we can't get back in stock until the next fashion season," he said. Some items, such as women's boots and children's shoes, are so popular the chain can't keep them in stock, he said.
Janna Adair Potts, senior vice-president of stores and distribution, said she's seen a "double-digit" improvement in reaching the goal of 98 per cent stocking accuracy in stores' back rooms. On the green zone display front, "we're green more often than we're not" while the opposite was the case a year earlier, she said.
Sales staff are being encouraged to chat with customers, whom Target calls guests. "If the guest is standing in toys, find out if they're looking for a birthday gift and help them with the birthday card," she advises staff."
She cited a salesperson who recently initiated a conversation with a couple expecting a baby. She showed them an Eddie Bauer furniture set but a piece was missing. The staff person called other stores and located the piece, put it on hold and printed out a map for the customers, resulting in a $1,400 sale (and a vibe moment). "It could have been zero."