January 31, 2015 | In: Opinion

10 Reasons Target Exited the Canadian Market

I love Target – I said it before and I’ll say it again. I was really saddened to see it go, and the fact that I’m pretty sure that Target’s decision is irreversible and that Target will never return to Canada for the foreseeable future makes the whole thing even more saddening.

Target claim that the reason why they’re exiting Canada is that they can’t foresee profitability until at least 2020 (5 years from now), and their $1 billion loss was the maximum price that they’re willing to pay to remain in Canada. Of course, they’re stating facts, but the question is, what were the reasons that led to this situation?

I, for one, can think of 10 reasons that caused this:

  1. Target expanded too fast: The main reason why this happened is that Target created over 130 stores in less than a year! This caused some serious pressure on Target’s cash flow since some stores were under-performing.
  2. Target had a problem with their supply chain: This problem is directly related to the first problem: Target just couldn’t quickly establish a reliable supply chain that will ensure that all of its stores are, well, well supplied!

  3. The Canadian shopper is frugal: Canadian shoppers are very frugal – and I’m stating a fact here. People are willing to drive long distances to save a few pennies per liter for gas, for example! Canadians were only buying Target’s deals (Target was actually losing money on some of these deals). Canadians are not interested in buying items at a premium (and by premium I mean 2 baby pajamas for $18 – yes, many Canadians find that expensive and are willing cross the border in order to save a couple of dollars on those pajamas)

  4. No online shopping: Many Canadians like shopping online – and almost all Canadians use retailers’ online stores for price comparison before deciding where to buy their items from. Target didn’t have a store. The only thing that they had was a flyer that was updated every week. In my opinion, that was very, very lame!

  5. The Canadian Dollar: Most items at Target are imported, in US$. Which means Target would have had to quickly increase their prices because of the weakening Canadian Dollar or risk even greater losses. This will be a deterring factor for Canadian shoppers who are definitely not very well prepared for this rapid inflation.

  6. Target’s staff is expensive: I’ll make this simple: compare Target’s staff to Canadian Tire’s staff. The differences are just too many. Target’s staff is probably the best in the world among retailers, and best means the most expensive. Of course, the staff’s overhead is manageable had the company been making money, but since the company was losing money, the staff became a contributing factor for its impending doom!

  7. Canada is no longer interesting for American retailers: American and international retailers are exiting the Canadian market in droves. This is possibly related to the US economical rebound (yes, there is a rebound): all the retailers right now want to focus all their efforts on the US market (and that is something that Target’s CEO mentioned in the letter announcing the end of Target Canada).

  8. The stockholders wanted to leave Canada: Many stockholders were against the move to Canada in the first place, and so every time the company was posting losses in Canada they (the stockholders) were putting pressure to exit the Canadian market. Maybe this is a bit shortsighted, but stockholders can’t wait for a decade or so in order to see some mediocre positive results.

  9. Some Canadians were unwelcoming: I hate to say this – but some Canadians were very unwelcoming to Target. In fact, some wished that Zellers (really, Zellers?) would come back to replace Target (Target took over almost all Zellers’ locations in Canada).

  10. Canada is overcrowded with retailers: Walmart, Costco, The Bay, etc… are all established in Canada for a long time now and so Target has to compete with all of them, and Canada is a relatively small market. In fact, it is a very small market. This makes this market a very un-lucrative market.

Of course, the last 2 points are not very strong – but they still are contributing factors. If you think of any more reasons why Target exited Canada, then please add them in the comments section.

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