Target is a US-based retail chain of stores and well established and recognized brand with a revenue of US$2.937 billion in the year 2019. Not only the American consumers love to shop at Target, but also Canadian cross borders for shopping there then why Target Canada failed? You will get answer by reading this post.
In March 2013, Target entered Canada with the vision to be a successful retailer as in America by opening its first store in Ontario and was operating 133 locations by January 2015 at diverse places in Canada.
It looks appealing with the numbers that target canada was doing good, but at a deeper level, there were hazardous circumstances that led the company to close all the stores on January 15, 2015. This post is going to scrutinize the causes with the specific reasons for the failure of this brand.
Target purchases 220 Zellers stores as they want expansion in a very short span of time, but they did not use all the stores properly. Disorganize, empty shelves and limited selection puts a very bad impression of the company in a customer’s mind.
The company faced this problem because of a bad supply chain and demand issues. It also made three distribution centers in less than two years. The company failed miserably to filled stocks in stores from distribution centers. Moreover, only 133 locations opened out of 220 lease locations.
Thus, the company failed miserably to spent money in the right place. As a risk manager, I suggest that slow and steady expansion was a good way so that company could check the supply chain of fewer stores properly.
The Target store location in Canada was not exactly perfect. Target purchased more than 120 Zellers stores near to Canadian department store Hudson’s Bay Co. and many were in shopping centers that were difficult to access.
The areas were smaller than Target’s typical U.S. formats and took more cash than expected to extend and change over to its trademark red-and-white design. In this field, location matters the most. The store should be opened in place that people do not find difficulty to search the store.
Too much Competition
When Target started expanding in Canada, at that time Walmart was at its peak. The number of other big competitors were also there-Costco, Canadian tire, Loblaws, Sears and Shoppers drug mart.
Thus, too much competition is also the reason for the downfall of Target. As a risk manager in order to enter in a very strong market, there should not be any loophole in any system of a new company.
The price rate of each product was high in Canadian target stores as compared to US stores. The customer noticed that the same product can be bought from other stores like Walmart at a cheaper rate.
So, the connection to binding the customer with the store was depleting and the customer started going to other stores.
Target took the risk regarding technology. In the U.S., Target used custom technology that had been fine-tuned over the years to meet its exacting needs, and the corporation had developed a deep well of knowledge around how these systems functioned. Target stores took unnecessary risks by introducing a new software system that was to do shopping with credit or debit cards.
On December 18, 2013 Target said that their system got hacked and data breach occurred. Around 110 million customers were affected by this data breach. More than 40 million credit and debit accounts were not secured and personal information of 70 million people was shared because of a data breach. This scandal destroys the image of Target stores completely.
In Canada, the company succeeded in hiring people with the right personalities, but young staff received only a few weeks of training. Inexperienced employees working under a tight timeline are expected to launch a retailer using technology that nobody even at the U.S. headquarters really understood.
Getting the details from suppliers largely fell on the young merchandising assistants, for roughly 75,000 different products into SAP according to a rigid implementation schedule.
As a risk manager, we should hire experience or inexperience people and train them on their job as well as their culture.
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One of the most epic ERP implementation failures occurred with Target Canada when Target, which has more than 1,800 locations in the U.S, decided to branch out into Canada, it made a mistake that wound up costing $7 billion.
In the U.S., an ERP system is very much important as it allows the company to order a product from vendors, process goods through multiple warehouses, and get products delivered to store shelves efficiently. Target has an outstanding ERP solution that enables it to function seamlessly.
The company can anticipate demand, fill its shelves on time and keep its customers happy. However, this solution couldn’t repeat the same story in Canada.
The reason behind this is:-
- Change in currency (Canadian dollar)
- Metric system
- French language
Canada uses Canadian dollars, metric system and both French and English languages. So, the existing ERP system couldn’t accommodate other currencies, measurements and language as America use only the English language, US and imperial systems of measurement.
The company thinks that updating an old system would take time so they give preference to a ready-made solution. As a result, Target decided to use a completely new ERP solution designed by an outside supplier.
The thing that wrong is:-. It had to enter all of its data manually into the system and it rushed to do this for its 75,000 products to be ready for launch. But the data was so inaccurate (an investigative team put the accuracy at 30 percent) that destroyed Target’s efforts to keep inventory humming through its supply line. That occurs when enough time did not give the staff to understand the new software system properly.
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To conclude, these are the most prominent reason why Target could not survive in Canada.
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