Target is abandoning its $US4.4 billion expansion into Canada after less than two years, the company announced Thursday.
The retailer is pulling its business out of the country after racking up more than $US2 billion in losses.
Target had promised investors that the Canadian business would be profitable by the end of 2013.
The retailer hired a new CEO and replaced the president of its Canadian operation to try and execute a turnaround, but its efforts failed.
Here’s what went wrong with the expansion.
1. Target store locations in Canada are less than ideal. Target bought more than 120 Zellers stores from Canadian department store chain Hudson’s Bay Co. in 2011 and “many were in rundown shopping centres that were hard to access,” according to the Wall Street Journal. “The locations were smaller than Target’s typical U.S. formats and took more money than expected to expand and convert to its trademark red-and-white layout.”
2. Canadian customers have complained that Target’s prices are lower in the U.S. “Canadians along the border find it a better overall value proposition visiting Target stores in the U.S. or buying online,” writes Brian Sozzi, chief equities strategist at Belus Capital Advisors.
3. Target Canada’s store shelves are disorganized and empty and selection is limited. In an interview with the Journal, a former Target employee complained of having to fill half of an entire aisle with Tide detergent when the store had nothing else to fill shelves.
4. Target is having a hard time competing with Wal-Mart, which expanded into Canada two decades ago.“Walmart is the household name to visit given its way earlier entry into the market and willingness to invest in price,” Sozzi writes.
5. Target’s launch in Canada was overambitious. The retailer opened 124 stores over 10 months in its first year.
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