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[11 comments]

Is Target in Trouble in Canada?

August 20, 2013

Ever since Target opened its doors in Canada, there have been complaints that the chain did not have enough inventory on hand to meet demand. The chain put a bright face on the issue up front by talking about how traffic to stores was exceeding its expectation.

Well, Target opened its first stores earlier this year and there is a new report that Canadians are growing less fond of the chain as time goes by. The reason the honeymoon may be over is that consumers say they continue to encounter out-of-stocks and also believe they are paying higher prices for the same items purchased in Target's U.S. stores.

According to a customer satisfaction survey by Forum Research, Target is at the bottom of the list among major chains in Canada, and its score is down from four months ago.

Target Canada spokesperson Lisa Gibson told the Globe and Mail that the chain is still in the "early days" in Canada, and its own surveys indicate improvements in customer satisfaction.

One of Target's selling points in Canada are promises that it offers a better shopping experience than its rivals, most notably Walmart. As early as February, Target was boasting in commercials that consumers could expect "a short line... every time" at its checkouts. Of course, if out-of-stocks cause Canadians to shop elsewhere, that will be certainly become more true, and that is not a good thing.

FINANCIALS:     [NYSE:TGT] [ NYSE:WMT] [ ]

Discussion Questions:

Why does it appear to be taking so long for Target to get its stock positions right in Canada? What do you do to address customer dissatisfaction if you're running Target Canada?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How long should it have taken Target Canada to get its inventory issues in check once they were identified as a problem?

Comments:

Why is it taking so long? Seriously? They just opened. It will take a few years for Target to get through the learning curve. Ask this question again in 3 or 4 years. It's like asking a first grader why he doesn't know algebra yet.

David Livingston, Principal, DJL Research

Canada's retailing environment is highly competitive and there are lots of well established retailers that execute well.

If Target is going to create a meaningful impact in the market, it will have to do more than rely on its reputation from south of the border. If anything, it will be held to an expectation of an equivalent or even better experience. Convenience and access to the merchandise will not be enough if it doesn't measure up to the price and experience that Canadians have had when shopping at Target in the U.S.

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Bryan Pearson, President and CEO, LoyaltyOne

This sounds like a supply chain issue that Target needs to handle quickly, otherwise they could be marking themselves for poor performance in Canada. The "Expect More. Pay Less" motto has to ring true wherever Target stores are opening, which is a difficult task. Analysts have stated that it's not fair to expect everything to run completely smoothly because of the size of the roll out. And although that is probably true, consumers don't want to be your guinea pigs or feel like you're learning to their detriment.

Target needs to get some better intel and work with suppliers fast to figure out the best way to move forward, whether it's more inventory plus promotions, or a new supply chain leader. It's probably a combination of all three. I would also address the concerns and let customers know their complaints were heard and Target is doing something about it.

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Zel Bianco, President, founder and CEO, Interactive Edge

Like going into any new market, it takes a few "same year anniversaries" to find the demand and assortment patterns. Interestingly enough, very few if any Canadian retailers have ever been successful crossing the border into the US. However, look at any Canadian mall today and trace the ownership of the stores—largely U.S. based. I'm sure Target will get it right over time. There's a lot fewer retail choices in Canada now then there were 10 years ago, so there's absolutely room for one more quality player.

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Peter J. Charness, SVP America, Global CMO, TXT Group

"Target's own customer satisfaction surveys show "continuous improvement," (Target) said ... "It is still early days."

Between Target's self-serving statements, and the whisper campaigns of competitors, it's hard to know the exact truth, but as both David and the above statement indicate, yes, it's still early.

Ideally, a launch goes perfectly, but it's just that...an ideal. Even if everything HAD gone perfectly in a tactical sense, there's still the problem of excessive expectations and the ghost of Zellers' past. I have faith things will work out; I believe Canadians are a patient people...many are still hoping for the Expos to return.

'notcom'

Maybe the Canadians just don't 'get' Target the way some Americans do. I guess I'm one of those. I only sometimes go to Target and because some items I buy are cheaper than Walmart there. Their low selection of hardlines and low quality, but rather high priced home items do not draw me in. Sure they are clean and neat, but many stores are....

Mike B, Storewanderer, None

A combination of fast-tracking the learning curve via suppliers and other partners, coupled with listening to shoppers via customer feedback, could help Target get things right faster. Doesn't much matter what industry analysts believe is an acceptable timeline if the customers disappear in the interim.

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Brian Numainville, Principal, The Retail Feedback Group

It is early days in a very competitive market, where experienced successful retailers are carving up the small Canadian market of 35 million residents into smaller pieces. It was a steep slope to start at 60+ stores.

Canadians have an emotional attachment to Target; they love the fun clothing and home decor, wide assortment and lower prices across the border. Shopping at Target is familiar and expectations were high—some things were lost in translation as the reality of the 15% HST sales tax as well as higher cost of doing business with higher wages, taxes, transportation costs and import duties, while limited, longer supply chains made product selections smaller, more expensive, and OOS more frequent.

The Canadian market has been building over the last 10 years. Major urban Canadian cities now have many choices for on trend fashion with HM, Old Navy, Aeropostale, and Loblaws Joe Fresh. As well, supermarkets a are very well represented with Loblaws 40% market share, Llongo's in Toronto, Quebec Metro stores, and Sobey's coming on even faster with Safeway Canada purchase while Walmart is expanding and repositioning as well with new merchandise and more fresh foods.

Target needs the right approach to position that they are working hard to develop a new Canadian Target experience shoppers will love, to source and promote trendy products that will appeal, explain the Target Private brands and their value - giving shoppers a reason to keep coming back.

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Distribution from the United States into and through Canada is not a simple task at all. That is why there are so many boarder stores on the States' side. Tax and tariff laws governing imports to Canada for resale or use are complex and can be especially harmful to resellers that don't do their homework. These laws and taxes are what is needed to pay for their socialized medicine entitlements so many are not easy to negotiate around.

I wonder if Targets' legal department simply dropped the ball here or perhaps operations didn't take legal very seriously, thus causing the inventory shortages. Product and logistics are not an issue at all, so it must be something else. We'll all find out soon enough what or who is causing this. The story should be interesting.

'gjarnoldjr'

It is easy to assume that what works in the US will work in Canada. However, Canadians tend to have somewhat different shopping habits and expectations (as outlined in this Toronto Star article.) and as such, retailers entering the Canadian market will need to make adjustments to succeed.

At this point, the most prevalent issues seem to be related to inventory and pricing. I think it is also fair to say that Target suffers to some extent from inflated expectations, as Canadians have historically loved Target stores, and were generally eager for Target's opening in Canada. I think it is fair to say that when Target does resolve its inventory and pricing issues, as I expect it will, shoppers will return. Hopefully, they can get it done quickly enough to not overly tarnish their formerly sterling reputation amongst Canadians.

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Alexander Rink, CEO, 360pi

Maybe Target buyers cannot find reliable suppliers at the price point Target is will to pay. I have seen this before where a chain will crank down the screws on the suppliers to reduce their prices or try to change the terms of the contract.

'Jim Bray'

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