Target Canada

Target Canada

In less than two years since it opened its doors to the Canadian market, Target Canada is closing its doors forever and moving back to its home market. It was 2011 when Target Corporation purchased 220 stores of Canadian discount retail Zellers for $1.8 billion. As Target had such an excellent reputation in the United States, Canadian customers had their expectations up in advance of Target’s arrival to the great white north.
One of the fundamental issues that Target struggled with in the Canadian market was its inability to keep their store shelves stocked up. Customers complained that the store had empty shelves even on days like Black Friday and Boxing Day.

Furthermore, the empty shelves in the stores were not just limited to one or two categories but almost every merchandise category was short of supply including footwear, apparel, FMCG and so on. Clearly there was a supply chain disaster unfolding and the Canadian population was not impressed. On the other hand, Canadians were repulsed by Target’s high prices on certain products and categories compared to its U.S outlet. Simply put, the cost to service retail stores in Canada is much higher than in the U.S. and the reason for this is that Canada has a smaller population which is spread across a vast distance.

Target operates three distribution centers in Canada: Balzac, Milton and Cornwell and employs about 1500 people and were outsourced to a third party logistics firm named Eleven Point Logistics which is a division of Genco. It also outsourced its food division to Sobeys. Target Canada made these strategic decisions to outsource these operational components of its business for its own reasons but suffice to say that it didn’t turn out in their favour.

Henceforth, the three main reasons I’ll come down to for Target Canada’s Supply chain failure:
1. The risks that was associated with doing International business such as fluctuation in currency exchange and higher cost of doing business in Canada.
2. The travel distance from the distribution centres to the retail stores was substantially higher in Canada than in the U.S. and the cost of fuel in Canada was substantially higher than in the U.S.
3. The cost of operating distribution centres was higher in Canada than in the U.S
The moral of this story is that it costs less to service a country which has higher population density than it is to service a country which has a lower population density.