On January 15th Target Canada announced that they would be closing down all their Canadian stores. After initially buying the majority of Zellers’ retail locations in 2011, Target had only been operational in Canada for three years before their shutdown.
Target has been plagued with a series of unfortunate issues since they opened operations in Canada. The well-publicised supply chain issues leaving store shelves empty, and management structure issues are only two of the more tangible problems.
The single biggest problem faced by Target has been a failure of brand management.
With many big box stores like Sears and The Bay losing customers year over year, the terrible online shopping offering available in Canada, and record numbers of Canadians choosing to spend their money south of the border, the Canadian retail market is ripe for a new entrant. Target obviously saw this opportunity and used the purchase of Zellers as a way to acquire the necessary locations and infrastructure to get started.
Unfortunately, Target completely miss-judged what the Canadian market was looking for. If they had wanted to buy into the status quo of Canadian retail they could have chosen to rebuilt the Zellers brand. Instead they chose to bring the Target brand to Canada. What is harder to understand is how they were unaware of the Canadian perception of their brand in the US while still seeming to want to leverage that perception to drive traffic to their new Canadian stores. By bringing the Target name to Canada there was a certain expectation of what that would bring with it. Unfortunately, just like Walmart Canada and Amazon Canada, which are merely shells of their american operations, Target failed to differentiate themselves. While the prices at Target in Canada were in no way bad, they failed to live up to the expectation of their brand name. The biggest question of all was why target would think that the Canadian market needed another player competing at all the same prices, using a similar business strategy, to the many companies already struggling in the Canadian market.
With a much greater, and more visible income disparity in the US, Walmart is considered a less desirable place to shop, or be seen shopping at. Instead, many people choose to shop at marginally more expensive stores, like Target. In Canada there is much less of a divide between socio-economic groups and a smaller visual divide. Walmart Canada recognised this difference and positioned themselves in a higher space than they fill in the US. In Canada people of a much wider range of incomes feel shopping at Walmart is more about saving money than being concerned about where they are seen to be shopping. As such, Target was no longer filling a gap in the market, but instead coming into the market head to head with many of the existing Canadian retailers.
Target misjudged how their place in the US market would translate in Canada, along with an ignorance of Canadian perceptions of their brand. They made the mistake of thinking that they could move into the crowded market of status quo of retailers in Canada without bringing anything their US brand offered, making them no different from their competition.