To say that retailing giant Target has had challenges in its foray into Canada markets, all of which have undermined consumer trust, is, if anything, an understatement.
Goodwill created in advance of its store openings has all but vanished. The company has had more than a billion dollars in operating losses. Performance over promise and under delivery has been so great, in fact, that the company recently posted a YouTube admission of mistakes and apology to Canadian customers:
Admitting to the array of problems may be the first important step back to recovering consumer trust.
The array of Target’s miscues in Canada has been close to staggering. To set up shop in Canada, in 2011 Target purchased most of the stores of Zellers, a major discount retailing arm of Hudson’s Bay Company (HBC). Though a number of these units were remodeled, many of the stores were decades old; and there was criticism about the refurbished Target stores’ appearance and locations. Some of these locations have significant merchandising issues – such as selling food on the second floor – and this has contributed to a strong, and lasting, negative impression.
Next, Target has had major distribution infrastructure and supply-forecasting problems, such as incorrect bar code reads, often resulting in empty store shelves. This has been especially seen in basic items such as food and detergent. Insiders see this as a failure of both culture and systems:
“In other words, we had way too much of things we didn’t need, and not enough of things we did need. Basics like milk, food or consumables that drive repeat business are always out of stock. Store leaders would catch major crap if they chose to fill a 4 foot shelf with more pillows (that were in stock) versus leave it empty (because there was no bedding on-hand that was supposed to be put there). Working in the store, we know empty shelves look terrible. Target would not allow us to make the decision to fill a 4 foot shelf.”
Also, according to insiders, stores are not informed by Target’s distribution centers what will be delivered and when. Target claimed that the supply issue was a ‘temporary growing pain’, but there have been numerous Internet postings about how across-the-board a problem this has been for the chain.
Merchandise pricing strategy has also been called into question. Canadians consider Target’s merchandise prices to be high, especially relative to the retailer’s U.S. pricing concepts. As a result, Target has brought in veteran merchandising executives to come up with new, more aggressive pricing. At the same time, Target has had multiple rounds of ‘rightsizing’ store staff headcount reductions, undermining the culture and employee morale.
These and related problems have created a significant disconnect with Canadian consumers. In short, there is a feeling that Target’s Canadian stores are just atrocious: To observers in the financial press, it is unclear whether, by applying American in-house solutions and bringing in U.S. executives, Target really understands the magnitude of its issues. In other words, instead of creating an experience that is tailored to Canadian tastes and attitudes, Target appears to have been trying to fit its square-peg U.S. enterprise culture into the round Canadian merchandising hole.
Adding to the mounting woes, two months ago, Target Canada’s CEO was fired (and their corporate CEO resigned).
To stop chasing the elusive trust rabbit, which is the Canadian consumer, Target will need to focus on evening out the overall store experience. This includes having an infrastructure and supply chain in place to make certain that shelves are always well stocked. It will require a major overhaul of the store culture. It will require more than just an online apology, but a genuine disciplined commitment and outreach program to reconnect, emotionally, with customers and rebuild trust and chain image.
|Michael Lowenstein provides strategic consulting, research design and in-depth, leading-edge analysis that helps clients deliver outstanding business results through deeper customer experience, communication, relationship, employee and brand equity insights. Beyond Philosophy provide consulting, specialised research & training from our Global Headquarters in Tampa, Florida, USA.|