General

Lessons Learned With Target Closing

Target’s CEO Brian Cornell announced that the retailer plans to close all of its 133 stores in Canada that they opened within the last 2 years. The bold decision to invest billions in Canada only to re-treat has some people scratching their heads thinking the CEO didn’t give their expansion north a chance.  The closure is estimated to cost some $600 million.

What are some of the lessons that can be learned from this costly mistake?

1.  Bad news isn’t wine – it does not improve with age.

Forecasts indicated that Target would lose money for the next five years and wasn’t expected to turn a profit until 2021.

2. Distractions can be costly to the management running the business overall.

Real leadership is about making decisions (including this big big one) decisively.  If the question “what should we do” festered, the company would have suffered both financially and culturally.

3, Fixing problem entrenched in customer’s minds may be self-defeating and a long haul to recovery.

Empty shelves, not having the right products on the shelf, pricing, and not consistently delivering on the value promise that it had with its US image were big problems for Target right from the start.  One of the biggest questions is how long would it take to fix these problems and then add the time required for customers to have confidence to come back to the stores (hence 5 year forecast).

4. Alignment to corporate objectives.

Target’s management is focused on growth (as so are the shareholders).  Competitor’s investing in smaller store formats versus keeping a big bandaid on the problems with the Canadian stores made the decision relatively straight forward.  Growth is not coming from Canada, growth is coming from where the consumer likes to shop – smaller store formats.

The incredible sad story as a result of this decision is the layoffs of 17,600 people – most of which worked hard to get the store’s setup and believed they had a promising future.

Kmart, Radio Shack, Sears and now Target are American retailers that did not succeed in Canada.