Northern Expansion Goes South

Volume 15 Letter 1

Target Stores were enjoying such great success in the USA retail market that they decided to expand to the “Great White North”. Taking a page out of Wal-Mart’s text book they bought the retail properties of a failing Canadian discount retailer, Zellers, and with great fanfare and an already highly recognized brand name Target opened in Canada in March, 2013. Many Canadian consumers know Target from cross border shopping sprees in the USA and were excited to see those same Target stores coming to Canada. Indeed that’s what Target promised in their advertisements and press releases. Unfortunately it’s not what we got!

Regardless of which strategy you choose for a new product release, typically you have one chance to get it right. Target’s strategy was to bring an existing brand to a new market but the launch was clearly off the mark. The Target Stores opened in Canada little resembled the Target Stores Canadians knew in the USA. Target’s slogan is “Expect more… Pay Less” and with lots of brand name products at discount prices Target in the USA delivers on their promise every day. However, in Canada, Target had huge supply chain issues. What Canadians got were a lot of empty shelves and prices 10% -15% higher than their USA counterparts. Who knew that “Expect More and Pay Less” translated into “Expect Less and Pay More” in Canadian!!

Adding to Target’s misery was that many Canadians already knew the store. With such high brand recognition one would think this would be an easy expansion! Most Canadians live within a 150 miles of the USA border and it’s not uncommon to do a short holiday / shopping trip to the USA and in fact, Target’s own research showed that a significant number of Canadians shopped at their stores situated in the Northern border US states. Plus, most Canadians receive American TV and so Target USA was inadvertently advertising in Canada. With the Canadian and US dollars almost at par during the Target expansion, Canadians, seeing one price advertised on US TV and finding another at the Canadian store, were unhappy with the disparity. Faced with the prospect of not turning a profit until 2021, Target decided to abandon the Canadian market writing off billions of dollars of investment. What can we learn from Target’s bad experience?

  • Know your market: Canadians aren’t Americans – thinking any two markets are the same is a big mistake often made by marketing strategist who should know better! An example of this was when Target held a big Remembrance day sale. Holding a sale on a day set aside to remember fallen soldiers was seen as disrespectful in Canada.
  • Don’t Launch prematurely: Target clearly hadn’t sorted out their supply chain issues leaving shelves empty and consumers frustrated.
  • Promise one thing deliver another: Target had promised the same shopping experience as in the USA. However Target in the USA and Target in Canada are two very different stores.

In a new product launch first impressions are everything! Canadians wanted the same Target stores that they knew from their experience in the USA. They clearly didn’t get it! With a “Canadian” Target store around the corner Canadians continued to shop at Target in the USA. Learn from Target’s mistakes and don’t let your great (Northern) expansion plans go south!

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