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Why Did Target Fail In Canada?

By Edited Apr 26, 2016 0 4

Many Canadians enjoy shopping in the United States.  Most items are cheaper across the border and the selection is usually much better.  If you can't find an item you want in Canada, you will likely be able to get it in an American store.

There also are a lot of stores in the USA that you will not find anywhere in Canada.  J.C. Penney, Macy's and Dillard's are a few examples.  Some of these stores will ship to our country, but by the time you pay shipping and duty it's hardly worth it, unless it is something you really want and can't find here.  

For many years we heard rumors that Target would be opening in Canada.  These stories began when Walmart launched here about 20 years ago.  Walmart was very successful from the beginning.  Some wondered why one of their main competitors was taking so long to make the move.

Finally the right opportunity came along in 2011 when Target acquired the struggling Zellers chain.  Zellers had been successful for many years, but the stores lost money and customers when Walmart began to offer better prices and selection.  

Target Store


Many People Looked Forward to the Opening of New Stores in 2013

The Zellers stores were in great need of an upgrade and makeover.  Target set March of 2013 as the date of the first store openings.  It began in large cities in Ontario.  The roll out across the country was gradual,  but all would be open by the fall of 2014.

All told 133 stores would be in business from coast to coast.  This was  a very ambitious goal that was partially responsible for the company's downfall.

The launch of Target was highly touted in the media and greatly anticipated by many Canadians.  Yet almost from the beginning there were major  problems.  The troubles snowballed and in less than two years the company was forced to apply for bankruptcy protection.   The store was running out of money and was going to have trouble paying their employees.  

Then in January the announcement was made that Target would leave Canada in the spring of 2015.

So what went so terribly wrong?


Four Reasons Why Target Failed

I purposely waited a week after the first store opened to go there for the first time.  I don't like shopping when stores are crowded and thought that would be the case in the first few days.   Like many other Canadians I had shopped at Target stores when visiting the USA, so I already had preconceived ideas about what to expect.  

It was nice to walk into the Target here and see the familiar bright, clean, nicely laid out store with the  red logo. However as I walked around I noticed quite a few empty shelves.  I thought that either they didn't have enough staff to replenish the shelves or the store was having trouble getting enough stock in the first place.  The rows of empty shelves would persist and plague the company for its duration.  It was blamed on a problem with their distributors.  It seems reasonable to believe they should have thought of this potential difficulty ahead of time and taken steps to prevent it.  

If you were to ask someone here what they didn't like about the store, bare shelves would certainly be mentioned.  However, it was not the only thing customers objected to.

Some Canadians went shopping at Target  thinking they were going to find  all the same items and nearly identical prices as the US stores.  Instead, they found that some products were not available and prices were definitely higher.  I did not blame the company for the not stocking all the same products.  Walmarts in the US also have some products you can't buy here.  The fact that some were not anticipating these two things meant Target had big issues that displeased  customers.   Customers will not shop at a store they believe is gouging them.  

I thought complaints about the prices were somewhat valid.  At the time the Canadian dollar was about on par with the American.  There are shipping costs to consider which increase prices, but even so, the mark ups seemed unreasonable.  

Negative publicity, combined with word of mouth soon turned a lot of people off Target.  In the meantime the company's  competitors had not been sitting idle.  Walmart was continuing its expansion in Canada with its mega Super Stores.  A new Walmart opened here about four years ago, and at the time it was the largest in North America.  I live in a city with a population of about 450,000, so it was quite remarkable that we would get such a huge store.  Walmart's aggressive marketing has paid off though as the retailer has done very well all across the country.

In addition to Walmart,  Canadian chains Superstore, Canadian Tire and Home Hardware, just to name a few, continued to expand and open in new locations.

We are a massive country in size but not in population. Target's decision to open over 100 stores in about a year and a half was risky and not at all realistic.   In hindsight it was almost certain to fail.

So higher prices, the absence of some popular products, empty shelves and expansion that happened at far too fast a pace  are what caused Target to fail in Canada in less than two years.  

Interior of Target Store


17,000 People Will Lose Their Jobs

Many people  will be affected by the closure of these stores.  17,000 employees will be looking for other work.  The staff have been promised four months severance pay, which will help for just  a short period of time.  

However finding permanent jobs elsewhere will be very difficult and challenging.  Winter and spring are not  good times to find work in retail stores.  Canadian retailers usually cut back on hours at those times and do little hiring.  I feel very sorry for the workers who are dealing with very stressful situations right now.  Some of them may have left other retail jobs to work at Target.  The impact might be quite major in smaller communities if the employees are struggling  to find new jobs.   

 Another big issue will be finding businesses who will take over the empty stores.  This amounts to millions of square feet of retail space.  A few of the stores in very desirable locations may be tempting for well established businesses to expand to, such as Costco, The Bay, or Canadian Tire.  However its likely that most of the retail spaces will be turned into smaller stores.  This  means at least part of the space may have to be destroyed in order to create the appropriate square footage for smaller stores.

Good Life Fitness, a Canadian chain, has expressed interest in expanding and is particularly interested in the Targets that have been in mall locations.  Hopefully the stores will not remain empty for long.  Good Life is also encouraging Target staff to apply at their locations.  

Target owes millions to companies such as Mattel, Starbucks, Canadian grocery chain Sobeys and many others.  In fact, the company is in arrears to about 1800 businesses, as well as some cities and governments.  Their total debts are a staggering $5 billion.  Target will go down in history as one of the largest bankruptcies ever to happen in our country.  It is quite shocking that a well established retailer could fail so spectacularly in such a short time.

I was very happy to seet he arrival of Target in our country.  I've never liked Walmart much and thought of Target as being much like Sears has been over the years.  Two years is a very short time, particularly since they weren't expecting to turn a profit for a few years.  But their debts were insurmountable and impossible to overcome. 

It is said you never get a second chance to make a good impression.  Once customers saw empty shelves, the absence of some popular USA products and higher prices, many decided they would  not return.  I never found the store to be busy even two weeks before Christmas.

I always liked Target but this fiasco has me wondering if I will shop there again when I go to the US for a visit.  The biggest issue, of course, is the thousands of people whose jobs have been affected.  

 Other  American retailers will undoubtedly learn from their mistakes.  Nordstroms has entered the Canadian market this past year with only one store.  Just five are scheduled to open by 2017.  So that is one retailer that is being very cautious and not taking a big risk.   This is a very prudent move on their part.  



Feb 5, 2015 3:47am
I always wondered why Target failed so quickly, I was so surprised to hear it was over before it seemed to begin with expanding markets. Informative piece and a good read.
Feb 5, 2015 7:01am
Thank you. Yes it sure ended quickly. The liquidation sales begin today.
Mar 4, 2015 11:31pm
Wow I honestly had no idea Target had even expanded to Canada, as it's been years since I've visited, and don't watch the news much these days. But they seem to be taking a few hits...if I recall correctly they had some sort of issue with their customer's credit card information being hacked here in the U.S. between summer and Christmas this past year.
Mar 5, 2015 8:37am
Yes I remember hearing about the card information being hacked. It's been a real fiasco here and I'm sure other retailers have taken notes so the same thing won't happen again.
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  1. "Target Canada Owes More than 5 Billion to Creditors." Toronto Star. 4/02/2015 <Web >
  2. "Target Canada was Running out of Cash." Toronto Star. 4/02/2015 <Web >
  3. "Target Canada's 17000 Laid Off Workers Face Grim Job Prospects." Financial Post. 4/02/2015 <Web >
  4. "Good Life Fitness Eyes Former Target Canada Locations." Financial Post. 4/02/2015 <Web >

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