Changes to the Canadian retail landscape continue to roil the mall and power centre tenant mix and atmosphere. One of the biggest changes that has taken place was HBC ‘s sale of Zellers to Target, the behemoth from Minnesota and a long time most desired U.S. retailer. The anticipation of Target Canada’s opening was palpable and nearly apoplectic. Canadian consumer hearts palpitated, the Twittersphere exploded and the landlords bruised each other with slaps on the back.
Not only was this a coup for HBC, which exacted an incredible price for a languishing and money losing brand, but many tenants in the same malls rejoiced at the prospect of increased foot traffic (even though some of them feared the brutal competition that would ensue).
By virtue of the high profile acquisition and the amount of press it garnered for weeks on end across the country, there is little doubt that brand recognition must have been in the high nineties by the time of their first location’s “soft” opening this past March. They were the “can’t miss” darlings on the scene after a brilliant run in the U.S.
Known as “Tarjay” for their stylish and fashionable brand perception and merchandise assortment, Target (formerly known as Dayton-Hudson department stores) established a niche for themselves as the anti-Wal Mart with respect to style, fashionability, fun and colour. Target excelled at apparel and cool housewares where Wal Mart did not. They created a perception of being value priced and they were able to differentiate their assortments enough from Wal Mart that it wasn’t necessary for them to get into a pricing war. They were the darling of 7th Avenue, Wall Street and Main Street all at the same time for years. Things have changed somewhat as both giants are facing off more directly in groceries than ever before.
Their opening in Canada was highly and uniquely anticipated. Their preparations were well planned out, with lots of lead time and it seemed they did their due diligence (unlike many U.S. retailers who enter the Canadian market without lifting a strategic finger). They promoted a Target insider to run the Canadian division and aggressively recruited in Canada for senior roles well ahead of opening their first store. Their message regarding supporting Canadian suppliers and designers was well received and smart.
And then they opened their doors…and all hell broke loose…and the halo came crashing down…
To be sure, there were the crazy and obligatory line-ups. There were some empty shelves during their “soft” openings in March. There was some clever marketing and PR for which they are famous. But overall it has been disappointing and uninspiring which I am sure has caught the company by surprise. The stores never sparkled like they do in the U.S. and it felt and looked as if the stores were a licensed derivative of the authentic product.
Stores shelves remain empty 6 to 8 months later; their senior team is primarily from the U.S.; their price points are un-Target-like; and their enormously positive brand perception has been severely and irreparably damaged.
How did this happen?
I believe the main issue has to do with the lack of managing expectations in the marketplace. Whether this is due to hubris (a common trait among U.S. retailers with respect to Canada), just plain ignorance or errors of omission (not hiring enough Canadian senior executives to help manage the entry strategy), it is too soon to tell. They did nothing to quell the avalanche of unrealistic expectations the Canadian consumer placed at their feet, probably because they wanted to maximize the hype and attention (which they didn’t really need to do if they knew the market well enough).
All they had to do was clearly state the following:
“Dear Canadian Consumer:
1) You and your country are very different than what we know from our home market in the U.S. and Target Canada is not going to be Target US (nor does it need to be). It will take time to get to know you and your incredible country but we can’t wait to do so!
2) Canada is a geographically complex place to do business and that it will also take some time to master the logistics of this vast and beautiful land of yours
3) Pricing parity is not an option due to higher tariffs and higher costs of doing business. However, you should know that we will be working closely with their suppliers and logistics experts every day to minimize these costs and still deliver the best value in Canada for what customers love about Target – stylish, hip and cool apparel and home merchandise
4) We have made an enormous investment in your market (over $3.0 billion after all stores are re-opened) and we are here to learn and grow over the long term. Please excuse any short term mistakes we will make. We will be constantly listening to your feedback and partnering with all customers, associates and suppliers to learn quickly and adjust even quicker
5) We are looking forward to our new journey together”
Now that the parent company has started to report results, we know what the missteps have cost them and there is certainly a sense of urgency to get things right. I do not believe it is too late to address the Canadian consumer in this transparent, humble way. In a crisis, you mitigate the damage by being honest, straightforward and, if necessary, contrite. There is no better time to do so than prior to their first holiday season here in our home and native land.