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Target`s Exit from Canada: A Supply Chain Debacle |
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| In January 2011, Target announced that it was foraying into Canada by acquiring a portion of Zellers Inc. (Zellers), a subsidiary of the Hudson’s Bay Company (HBC). Target had agreed to pay Zellers C$1.825 billion in two equal payments of C$912.5 million, to acquire the leasehold interests in up to 220 sites operated by Zellers in Canada. Gregg Steinhafel, former chairman, president and CEO of Target Corporation, said, “This transaction provides an outstanding opportunity for us to extend our Target brand, Target stores and superior shopping experience beyond the United States for the first time in our company’s history. We believe our investment in these leases will strengthen the surrounding communities, as well as create strategic and financial value for Target stakeholders.”.. |
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| In Canada, Target operated through three distribution centers. The first one was in Balzac, Alberta, where Target operated a 1.30 million sq. ft. regional distribution center that supported 46 stores from Vancouver to Winnipeg. The furthermost store was 844 miles from this distribution center. The second one was in Milton, Ontario, where Target operated a 1.32 million sq. ft. regional distribution center that supported 45 stores in Ontario, west of Kingston. The furthermost store was 871 miles away from this distribution center. The third one was in Cornwall, Ontario, where Target operated a 1.35 million sq. ft. regional distribution center that supported 41 stores in Eastern Ontario, Quebec, New Brunswick, Nova Scotia, and Newfoundland. The furthermost store was 1,644 miles away.. |
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| The early demand for Target’s expansion into Canada came from Canadian cross-border shoppers, who were enthralled with its store design, high quality collection, and low prices. However, these same shoppers grew dissatisfied when they realized that many of the goods were much cheaper in the American stores even after accounting for the exchange rate in Canada. The prices were higher than what Canadians were used to paying across the border. Also, the selection did not match the local tastes. According to a study, 41% of Canadians thought Target Canada was not as good as Target US when it came to apparel selection. Many Canadians also thought that Target Canada’s selections in home furnishings (35%) and home décor (36%) were not as good as in its US stores. .. |
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| A year after its entry into Canada, Target released its annual results in February of 2014 which stated a US$941 million loss in Canada. Cornell said, “Our Target Canada business had reached the point where, without additional funding, it could not continue to meet its liabilities. Simply put, we were losing money every day.” . |
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| Analysts felt that despite similarities between Canada and the US, there were intrinsic differences between the two markets, which Target had ignored at the beginning. For instance, differences in Canadian legislations and regulations such as packaging laws and food tariffs implied that Target was not supposed to run the Canadian stores using its American distribution network. Added to that, local formats such as the Canadian dollar, French language typescripts, and metric dimensions made Target modify its technical setup which cost lot of time and money for Target. Analysts opined that Target opted to install a new, distinct strategy for Canada, which was not suitable for a perfect launch... |
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Exhibit I:Target Losses in Canada
Exhibit II: Consolidated Statements of Operations for Target Corporation
Exhibit III: Loss on Discontinued Operations in Canada
Exhibit IV:Average Sales per Store per Day in Target Canada vs. Target US
Exhibit V:Empty Shelves in Target Canada Stores
Exhibit VI:Comparison of Target Canada Prices with Walmart Canada Prices as of 2014
Exhibit VII:Target’s Website offering Shipping to Canada after exiting Canada
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