Target Closes All 133 Stores in Canada, Gets Creditor Protection
CBC.ca
Jan. 15, 2015
Jan. 15, 2015
Coded Expectation
IM3.01- identify companies that have made mistakes when entering foreign markets and describe the most common mistakes.
Summary
Less than two years after opening it’s doors, Target is closing all 133 stores in Canada, affecting 17,600 employees. Target was met with high expectations when it first came to Canada, but disappointed customers with higher prices and less selection than their US stores. The CEO of Target stated that the company would not be profitable in Canada until 2021, and with Target’s US stores also doing poorly, wasting more money in Canada did not seem like a good idea. The two years Target lasted in Canada cost them over $1.5 billion in losses, but they’re set to wipe $1.2 billion of debt off their books if they can sell all of their property and get out of their leases. Target has also set up a fund worth $70 million to ensure all employees receive up to 16 weeks pay. The total cost of the departure will cost between $500-$600 million.
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Target is closing all stores in Canada after seeing enormous losses (12).
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Connection
This article details Target’s fateful mistakes when it entered the Canadian market. While not radically different than the United States, Canada was a foreign market, and Target was not prepared. This CBC article details exactly what went wrong with the corporation’s plans. When Target entered Canada, it arrived to much fanfare. Many Canadians had shopped in their US stores and came to expect low prices and a wide variety of high quality items. However, as the article states, “The chain failed to deliver right out of the gate as customers faced higher than expected prices and empty shelves...”. As a McMaster University retail analyst put it, “...they overestimated the reception they would get.” That was Target’s first mistake, but not their only one. The article quotes a Moody’s analyst, who identified the main reason Target needed to cease their Canadian operations, as saying, “...Target’s strategy to simultaneously open stores while building out or developing its supply chain became insurmountable.” Due to this analysis of Target’s failure to enter Canada, it is a perfect article for the connection selected.
Aside from Target’s specific failures, the article also details why so many retailers fail in Canada. This is a perfect example of the connection that states, “describe the most common mistakes”. One of these most common mistakes is the retailer’s lack of understanding; many do not realize how difficult of an environment Canadian retail is. As the article states, “Fashion shops Mexx, Smart Set and Jacob have all announced plans to close down in recent months.” Unfortunately, Target did not understand the most common mistake while entering Canada; they underestimated their competition and overestimated their reception.
Aside from Target’s specific failures, the article also details why so many retailers fail in Canada. This is a perfect example of the connection that states, “describe the most common mistakes”. One of these most common mistakes is the retailer’s lack of understanding; many do not realize how difficult of an environment Canadian retail is. As the article states, “Fashion shops Mexx, Smart Set and Jacob have all announced plans to close down in recent months.” Unfortunately, Target did not understand the most common mistake while entering Canada; they underestimated their competition and overestimated their reception.