Off-Target Target

Target (www.target.com) decided to move into the Canadian market after Zellers, a subsidiary of

the Hudson's Bay Company (www3.hbc.com), closed in 2011. Target bought rights to 220 Zellers

leases for $1.8 billion and opened 133 Target Canada stores in 2013 to much fanfare.

Customers who used to buy low-priced Target goods in the United States were looking forward

to similar deals in Canada, and were shocked that the prices here were higher. Perhaps customers

did not realize that there were freight, duty, and foreign exchange issues to bring products in to

Canada, but Target prices were higher than those of Walmart (www.walmart.ca/), a close

competitor. Walmart had lowered its prices before Target stores opened, so that it could retain

its customer base. Did Target not use its IT systems to assess what was happening with sales or

to do early warnings with its competitors?

Customers also complained about poor product selections and empty shelves. Target apparently

had trouble with its inventory management and distribution systems and was unable to get

products to shelves quickly enough when popular items went out of stock. At the same time,

Walmart added new designs to attract customers (low-cost and vividly coloured housewares, for

example). It also tailored food offerings in its local stores to attract local customers' grocery

shopping; for example, selling a pork spread called cretons in Montreal and low-cost maple syrup

in its stores. The Stratford, Ontario, Target store had a Walmart store open across the street at

the same time, resulting in very poor sales for the Target store.

In January 2015, Target Canada filed for bankruptcy protection. Court documents stated that

cash flow was so low that the company would not have had enough money to continue to pay its

employees. It stated that the rollout of stores was too rapid. At the time of closure Target Canada

had about 17,600 employees in 133 stores. The Canadian subsidiary experienced losses of about

$2 billion in less than two years of operations, which was about three times more than it had

forecast. In its 2015 financial results, the U.S. parent company wrote off $5.1 billion due to the

closure of the Canadian operations.

Target made the decision to not have online shopping available to Canadian customers. This was

an example of how absent IT systems could have hindered the retailer's ability to compete, since

online shopping can increase traffic to a store if "buy online and pickup in-store" is implemented

as the delivery strategy.

To compete more effectively online against Target, major retailers turned their stores into mini

distribution hubs. Retailers such as Walmart (www.walmart.ca) and Loblaw's Real Canadian

Superstore (www.realcanadiansuperstore.ca) are using click-and-collect drop boxes. Let's look at

how this works. For example, a customer places their grocery orders through the Real Canadian

Superstore website and chooses a convenient time for the pick-up of their order, and when the

online order is completed, the grocery store employees go through the store picking the hard

and soft goods, the produce, and perishable items such as milk, fish, bread, etc. Once the grocery

order has been all picked, it is placed in a climate-controlled waiting area. The customer drives

their car to the "click-and-collect" section of the store's parking lot, where the staff will load the groceries into the car. Orders must be at least $30, and customers are charged $3 to $5 for

convenience. Loblaw Companies Ltd. made a "click-and-collect" option available at some of its

Real Canadian Superstore locations in several provinces in Canada.

Other Canadian retailers such as Canadian Tire (www.canadiantire.ca) and Loblaw were

experimenting with their so-called "omni-channel" strategies. Canadian Tire allows customers to

accept home delivery for large items such as barbecues, but most of its online orders are picked

up at stores. Currently, Canadian Tire has enabled customers to shop online and pick up their

orders in a locker at the stores instead of getting home delivery. Customers are given a PIN code

with their order to access their packages in a locked unit. According to Canadian Tire, the new

locker system is appealing to its customers, with families constantly in motion going to work,

taking the kids to school, sports, music, etc.

Was it just Target's own mismanagement that caused its Canadian exit? No, it was the uncertain

Canadian retail environment, too. Retail is a rapidly fluctuating market. In 2014, when Target was

operating, the first three quarters of the year saw Canadian consumer spending as "stagnant,"

with only the crucial fourth quarter seeing an increase in retail spending, going up 3.8 percent

from the same quarter in 2013. In addition to Target, other foreign retailers moved into Canada

throughout 2013 and 2014, including Marshalls (www.marshalls.ca/), Nordstrom

(http://shop.nordstrom.com), Muji (www.muji.com/ca/), Ann Taylor (www.anntaylor.com), Loft

(www.loft.com), and J. Crew (www.jcrew.com).

However, in 2014 and 2015 there were also several large crashes. Mexx Canada announced

bankruptcy protection in December 2014. It closed 95 stores, laying off 1,700 employees. Its

Dutch owners also filed for bankruptcy in Holland. Smart Set was closed by Reitmans

(www.reitmans.com), announced in November 2014, with 31 stores closing and 76 being

converted to other banners. Boutique Jacob, a Canadian chain based in Montreal, filed for

bankruptcy protection in May 2014, shuttering 92 stores. Sears Canada (www.sears.ca) in 2014

closed stores in malls in major centres, such as the flagship Eaton Centre in downtown Toronto.

Sony Corp. (www.sony.ca/en) closed all 14 of its retail locations in early 2015, Bowring

(http://bowring.ca) and Bombay (www.bombaycompany.com) shut 40 of their 120 stores, and

Laura Canada (www.laura.ca) aimed to close up to 9 of its 21 stores.

Perhaps Target has a good handle on the U.S. market, since its 2015 financial results showed on

target sales and profits for the U.S. market after taking into account the huge bath of the

Canadian operations. And, it now offers shipping to Canada. It is Walmart's turn to reconfigure.

On January 15, 2016, Walmart announced that it would close 269 stores in the United States and

South America, leaving Canada unscathed. This will result in the layoff of over 16,000 employees,

with about 10,000 in the United States.

Sources: Compiled from Associated Press, "Walmart to Close 269 Stores in U.S., South America," CBC.ca,

January 15, 2016; Bloomberg, "American Apparel to Close Some Stores, Lay off Workers," Toronto Star, July

7, 2015; D. Flavelle, "Canadian Strategy Found to Be Off the Mark," Toronto Star, January 17, 2015; V.

Himmelsbach, "Adapting to the New Kind of Shopper," Toronto Star, December 26, 2015; "Laura Clothing

Chain Files for Creditor Protection," CBCNews.ca, August 4, 2015; F. Kopun, "Lessons from Target's Canadian Expansion," Toronto Star, April 11, 2015; The Canadian Press, "Mexx Canada Liquidating Stores

Before Closing Doors End of February," CTVNews.ca, January 14, 2015; F. Kopun, "Target May Have

Underestimated Losses," Toronto Star, February 26, 2015; www.target.com, www.walmart.ca,

www.walmart.com, accessed February 20, 2015.

Sources: Compiled from "The Omni-Channel Opportunity for Retailers: What's the Story?" The Guardian,

January 14, 2015; J. Popovec, "Nordstrom, Walgreens Praised for Omni-Channel Strategies," National Real

Estate Investor, October 9, 2014; D. Newman, "The Omni-Channel Experience: Marketing Meets Ubiquity,"

Forbes, July 22, 2014; J. Green, "Why and How Brands Must Go Omni-Channel in 2014," Marketing Land,

January 27, 2014; R. Borison, H. Shaw, "Walmart Canada Expands 'Grab and Go' Online Service as

Competition with Amazon Heats Up," National Post, November 27, 2014; M. Kashty, "Walmart Canada

Expands Grab & Go Locker Service," www.canadiangrocer.com, December 1, 2014; M. Strauss, "Wal-Mart

Adding Fresh Food to E-commerce Offerings," The Globe and Mail, June 5, 2015; D. Penner, "Real Canadian

Superstore Ups Online Shopping," Vancouver Sun, November 12, 2015.

Q1:Discuss customer-facing and customer-touching CRM applications at Target and provide example for each? Explain why the customer-facing and customer-touching CRM applications at Target should be integrated with the information systems used at Target's other departments (i.e., Accounting, Finance, HR, etc.).