Target (TGT) decided to expand north into Canadian markets in 2011. By 2013, it had built 133 stores across several Canadian cities. By the end of 2014, the powerful American conglomerate took a $5.4 billion write-down and closed all of its Canadian operations. Target CEO Brian Cornell said "Simply put, we were losing money every day." Reasons offered up for this high-profile failure include poor location selection, bad inventory planning, a successful low-pricing campaign by Wal-Mart (WMT) and an inability to adapt to different Canadian shopping habits.

Zellers Chain and Location Error

Some 120 of Target Canada's locations were built into the property of the now-defunct chain store Zellers. The decision to use Zellers locations, hailed as a genius move at the time, resulted in Target experiencing a multibillion-dollar case of buyers' remorse.

There is a reason the Zellers locations came at a discount. Many Zellers locations were in run-down shopping centers. Most were difficult to access and had limited space. Canadian customers, who were familiar with the Target stores in the United States, often complained about the underwhelming size of Target Canada.

Inventory and Empty Spaces

No retailer wants to show its customers empty shelves or limited product offerings; Target Canada managed to do both. Many of the products that drove Canadians south into American Target stores, such as Cherry Coke soft drinks, were conspicuously absent. One infamous article in The Journal alluded to an entire aisle being filled with Tide detergent when there was no other inventory to use. Stores like Target and Wal-Mart thrive on offering tens of thousands of different skews in every store. For Target Canada, the one-stop shop devolved into simply one more shop with a high-profile name.

Price Wars

Wal-Mart was not the only competitor to slash prices and enter a price war when Target invaded Canadian markets, but it was certainly the biggest and most influential. By 2011, Wal-Mart had been successfully selling to Canadians for nearly two decades. Its 400-plus stores were well-established and generating in excess of $20 billion Canadian ($16.7 billion U.S.) per year. Just like its original American iteration, Wal-Mart Canada proved why it is the best price warrior out there. In fact, Target Canada's prices were higher than American Target stores as the company tried to recoup the costs of integrating into unfamiliar markets. Target Canada was ill-equipped and slow responding to Wal-Mart Canada's low prices. Without Target's customary clean red and white look and higher-end products, the Canadian operation failed to offer Canadian customers any reason to abandon their familiar American superstore.

Canadian Shoppers

Target Canada's president of operations, Tony Fisher, first pointed out in 2013 that the company underestimated the difference between Canadian and American consumerism. Specifically, he noted Canadians are less likely to embrace one-stop shopping models. Canadian publications and testimonials suggest Target was interpreted as haughty, overambitious and presumptive in its expectation of Canadian customer support. In other words, Target had a public relations problem. That reputation, combined with poor offerings and bad locations, spelled doom for Target Canada.

  1. What are the most common market indicators to follow the Canadian stock market & ...

    Learn key indicators used by analysts to follow the Canadian stock market and to gauge the condition of the overall Canadian ... Read Answer >>
  2. Who are Target's (TGT) main competitors?

    Learn more about the discount retailer Target and its competitors. Find out some of the things discount retailers do to increase ... Read Answer >>
Related Articles
  1. Personal Finance

    How Target Can Expand Internationally

    Target needs to get back onto the international scene in order to take on its largest competitors. There's only one way to do it, and it involves the Internet.
  2. Insights

    Cross-Border Shopping: Bane Or Boon?

    Lower prices, better selection, lower sales tax rates and a strong Canadian dollar draw over 1.9 million Canadians over the border to shop every month.
  3. Investing

    Target Embraces Being A Dividend Stock (TGT)

    Target has ended its growth stage. Despite plenty of areas in which the company can expand, Target has instead decided to focus on paying dividends.
  4. Financial Advisor

    Looking for Good Investments in Canada? Try These Stocks (BAM, CTC.A)

    Discover why investing in Canadian stocks makes sense and which Canadian companies to invest in even with oil prices at multi-year lows.
  5. Trading

    The Canadian Dollar: What Every Forex Trader Needs To Know

    Canada is becoming an increasingly viable alternative to the U.S. dollar, making it more important in the forex market.
  6. Personal Finance

    Short-Sighted Retailers: Why Target is Losing the Retail Wars (TGT)

    Target has not invested enough in its long-term future, preferring instead to borrow ideas from other retailers.
  7. Personal Finance

    Quiz: Are Your Finances Above Average?

    We look at average Canadian debt, credit scores and much more so you can find out how you stack up.
  8. Investing

    Target Should Focus on Growth, Not Share Buybacks

    Target has an ambitious plan to return money to shareholders. It ought to focus on growth, rather than decrease its cash reserves.
  9. Investing

    Canada's Commodity Currency: Oil And The Loonie

    When the price of oil goes up, don't worry about how much gas is going to cost - get even by making a play on the Canadian dollar.
  10. Investing

    Target Going "All In" On Small Stores (TGT)

    Target CEO announces his intention to open hundreds of small, urban Target locations
  1. Investment Canada Act - ICA

    A piece of legislation designed to provide for the review of ...
  2. Statistics Canada (StatsCan)

    Canada's government agency responsible for producing statistics ...
  3. Foreign Plan

    A retirement savings plan created by a person or a company to ...
  4. Canadian Association Of Petroleum Producers - CAPP

    A trade organization whose members operate petroleum and natural ...
  5. CAD

    What currency is CAD? CAD is the currency abbreviation or currency ...
  6. Big Six Banks

    A term used in Canada to describe the National Bank of Canada, ...
Trading Center