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Expanding into Canada? How to Avoid the Problems Target Faced

Posted by Anna Mastrandrea

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Mar 27, 2019 9:00:00 AM

Expanding into Canada How to Avoid the Problems Target FacedExpanding a business can be an exciting opportunity and a monumental challenge for any management team. Even American companies expanding into Canada can face an uphill battle when finding success beyond the 49th parallel.

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One of the most infamous examples in recent memory is Target. The US retail chain thought it saw an opportunity in Canada when fellow retailer HBC closed its discount chain, Zellers. Target moved swiftly, buying up previous Zellers locations. Canadian consumers, who had been lobbying for Target for years, celebrated, and success seemed all but guaranteed.

Even in the first year of Canadian branch operations, however, there were signs of trouble. Within two years, Target announced it was shuttering the doors on its Canadian experiment.

The move left the business community asking, “What went wrong?” As it turns out, Target made a number of missteps when entering Canada. If you’re planning a Canadian expansion, heed these lessons and avoid making the same errors.

Conduct a Thorough Market Analysis

One of the biggest problems Target encountered was that top brass didn’t fully understand the Canadian market before crossing the border. This led to a number of problems, from market strategies to issues with the supply chain.

It’s easy for American businesses to assume they know how to deal with supply chain logistics. After all, the US is a geographic giant with many of the same geographical features and challenges. In Canada, however, issues within supply chains snowball due to smaller population centers. Servicing the same number of stores spread across the same area is even more costly and difficult when the population you’re working with is less than half of an American population.

The other major issue with Target’s market analysis was that it didn’t accurately portray why Canadians loved the brand. In addition to the empty shelves caused by supply chain issues, Target also failed to bring the exclusives it boasted in the US. Management mistakenly thought the excitement expressed by Canadian consumers was for low prices. If that had been the case, Zellers would have survived Walmart’s incursion.

Instead, Target made the error of going toe-to-toe with Walmart by offering low prices. It also tried to compete with other Canadian retailers, such as supermarket giant Loblaw’s, which offers chic, affordable fashion alongside groceries.

Take Smaller Steps

Within its first year, Target’s executives were admitting the retailer had bitten off more than it could chew with its Canadian expansion. This was apparent in the supply chain issues mentioned above.

Target overestimated enthusiasm and misunderstood what Canadians thought its brand offered. This led to overconfidence, and the brand bought up many former Zellers locations in short order, expanding rapidly throughout the country.

Opening fewer locations would have allowed for a more controlled, cautious expansion process. This, in turn, would have allowed Target to experiment on a smaller scale. The supply chain issues could have been resolved before they became widespread problems affecting thousands of Canadian consumers.

Tailor for Canadian Sensibilities

A slower expansion also would have allowed Target to tweak its Canadian strategy. One of the problems Target encountered was a failure to translate. Again misreading the market, Target thought Canadians wanted a pure replication of what they found in the US.

This didn’t work. Canadian consumers who were unfamiliar with the brand saw no reason to shop there. Those who were already Target customers in the US complained about higher prices and lack of selection.

In short, Target alienated the people who had advocated for it and failed to appeal to Canadian consumers who were unfamiliar with the brand.

Your strategy must be aligned with the Canadian market. Although Canada and the US share some cultural similarities, a carbon copy of a US company rarely finds a foothold in Canada.

If you keep these factors in mind, you’ll have a better chance at a successful Canadian expansion.

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Topics: Business Expansion

Anna Mastrandrea

Anna Mastrandrea is the team lead of the payroll department at The Staffing Edge. For over 10 years, Anna has been providing the highest level of customer service to our members. Anna is an important part of our back office operations, running payroll for all of our members assignment employees, ensuring all proper payroll deductions have been set up, billing clients, and processing record of employment and filings to Service Canada. Her goal is to make sure all of our members assignment employees are paid properly, and most importantly, on time. Anna’s passion for challenges, learning, and problem solving makes her a great asset for our members, as no one member’s situation is ever the same. When Anna is not on the job, she enjoys spending time with her family, indulging her love for great wines, and playing volleyball.
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