How Target failed in Canada
canadianbusiness.com
canadianbusiness.com
It didn’t take long for Target to figure out the underlying cause of the breakdown: The data contained within the company’s supply chain software, which governs the movement of inventory, was riddled with flaws. At the very start, an untold number of mistakes were made, and the company spent months trying to recover from them. In order to stock products, the company had to enter information about each item into SAP. There could be dozens of fields for a single product. For a single product, such as a blender, there might be fields for the manufacturer, the model, the UPC, the dimensions, the weight, how many can fit into a case for shipping and so on. Typically, this information is retrieved from vendors before Target employees put it into SAP. The system requires correct data to function properly and ensure products move as anticipated.
A team assigned to investigate the problem discovered an astounding number of errors. Product dimensions would be in inches, not centimetres or entered in the wrong order: width by height by length, instead of, say, length by width by height. Sometimes the wrong currency was used. Item descriptions were vague. Important information was missing. There were myriad typos. “You name it, it was wrong,” says a former employee. “It was a disaster.”
I guess if boxes could only be stack standing up it might matter.
7 billion debt and no profits until 2021? That was the most telling story to me.
Testing in production, good job.
Sounds like a typical systems integration fail, IT incompetents trying to hook up SAP, JDA, Manhattan, and NCR with no clue how much time and money it really takes to assemble such a complex systems infrastructure, and getting fleeced by consultants in the process.
Well, failing to properly set up production is probably more accurate.
The major incentive for SAP is to drive customers to their consultants. It's basically designed to be impossible for anyone else to maintain, or use.
Target should have modified their American in-house system instead, where the incentives align with Target running smoothly.
Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper. “They figured out how to game the system,” says a former employee. “They didn’t want to get in trouble and they didn’t really understand the implications.”
I think this article, and the employee quoted here, works too hard to excuse immoral behavior in their junior business analysts.
Why would you only look at stock amount and not stock turn. I would be concerned at "in stock, sold zero".
This whole story is a clusterfuck.
"We are going to have a new product, it ships on June 1st, no matter how ready it is" has never been a wise choice.
Show me a metric and I'll show you a game.
This failure not only damaged the careers of many Canadians but also irrevocably damaged the professional lives of people in my town who were laid off. While the job market in Minneapolis is fairly good it became a struggle for some of these newly jobless Target folks to find work in town because of the massive white collar layoffs.
Target should have been successful in Canada, all of the problems in this article are linked to over the top pressure and hubris.
Target decided it was a good idea to buy up all the Zellers locations and put their stores in there. But by that time, people's habits changed. Target wasn't going to revive dead malls.
Walmart did take a lot of the lower end product sales and Sears was similar to Zellers with a few higher quality items but Zellers was still busy.
You but something at Walmart it falls apart in six months, Sears lasts and stands by what they sell, Zellers was in the middle.
Unfortunately they also grabbed a lot of other locations that were probably underperforming. They over extended themselves.
Target was always easy to shop at - nobody else was there - I could walk down any aisle and not have to deal with other people getting in my way.
Fresh food delivered from the local Sobey's distribution centre (at least I'm pretty sure that's where it came from). And nobody else pawing through it before I chose what I wanted.
Somewhat unique stuff - sure they had all the same mass-produced junk that WalMart did - just slightly different. So it was basically the same but just different enough to be say "Ha! I'm unique"
Good prices - I know people were always complaining that WalMart was cheaper but that wasn't necessarily true. Target had some good deals as well. And if you combined your Target shopping with an occasional trip to Costco you were pretty well covered.
There were piles of clothing for (obviously) teen girls, a lot for women and boys but for men there was nothing. I'm in my 40s I have no interest dressing like a 15 year-old.
Overall choice for everything else was very limited and the prices were higher than the previous store there (Zellers). Some people who went to Target in the USA said the choices in Canada were very limited and prices were double for the same items.
I bet millions were spent on renovating the local store here alone since it was pretty grungy before Target took it over.
Worse is when Target took over they were the anchor store and demanded all the little kiosks in the main route of the mall be closed. No sunglasses huts, engraving, tobacco or lottery booths either since rumour was Target is owned/started by a fundamentalist religious family(?). Target put a lot of small stores of of business before they even opened the Target store causing a lot of hurt feelings in a small town.
I think you might be confusing them with Hobby Lobby, the company that went to the US Supreme Court so they could deny contraceptive coverage in their employees' health insurance plans. I won't set foot in a Hobby Lobby now.
With them closing the kiosks, that just sounds like your typical dick corporation move, to try to shut down competition and drive up traffic in their store.
They didn't deny contraceptives; they denied (what they believe to be) abortaficients. Big difference.
No, because they are fine with contraceptives which they don't believe are abortaficients. A contraceptive prevents conception (hence the name); other drugs, devices or procedures end lives (whether by preventing implantation or directly killing the fœtus). I think that several of the things they believe are abortaficients aren't, and that there's decent science behind that, but I also can't blame them for not trusting folks who don't apparently care about the distinction between something which prevents contraception and something which prevents implantation.
I also don't think that an employer should be made to pay for the health care of employees in general. I eat more than I ought; my health is worse than it should be. Who should foot that bill which results from my choices: my employer or myself?
If you want to correct the original, the correction would be that they oppose some contraceptives. The fact that they oppose them based on ignorance about how they work is, again, not a correction but merely an elaboration.
It was late November after Target had been open for a while. I popped in to look for Christmas stuff and I was blown away by the quality. All of their decorations and trees were dramatically better in quality than the usual cheap garbage found at Canadian Tire and Walmart. I was super impressed. I was on my lunch break and I didn't have a lot of time, so I decided I'd come back on a weekend to pick up some things.
I show up again next week in the first week of December with my friend, because he was looking to buy an artificial tree, and I was shocked to find out that they were basically sold out of all trees. They still had some decorations but not a lot. I couldn't understand it. How on earth do you run out of Christmas trees in the first week of December? I asked this to a young guy who was working there and he just shook his head in disappointment. He'd clearly been hearing a lot of this.
Their logistics were completely messed up.
I'm surprised they opened at all.
All Target needed to do is G42 their VV6s into a bunch of CC5 subtables. Then they'd have been free to JK8 the W1 data to an F123098 batch, and... abracadabra, Y29 reports for the whole company!
Hmm, wait a moment. I think that should be G420, not G42. Let me call my consultant, and I'll get back to you.
Found some documentation on Google - I thought you were joking :(
Even Oracle lets you install their database for free to figure out how to use it. You'll never get that chance with SAP. Is it any wonder SAP analyst get paid so much money? I'd say it's not just for their expertise, it's because SAP have sewn up the market.
Big-bang launches aren't just bad in software. Imagine if they had opened one store, and then iterated on it until they got it right. Then a second store, maybe a third, and slowly spread out. They'd have built a successful organization in 5 years rather than one that collapses after 2.
They couldn't launch just one store. That was the root cause of everything according to the article.
Target Canada took over the leases on all that real estate at once - it was costing them money to leave those stores empty. That's what drove the insane schedule.
Fourth paragraph:
"Under Steinhafel, the company paid $1.8 billion for the leases to the entire Zellers chain in 2011"
Also later we read that Walmart were sniffing around the same real estate:
Walmart approached him and offered to buy the Zellers chain from HBC. Baker realized there was more value to Zellers’ real estate than to the operation itself, since Walmart had soundly beaten the brand. An astute deal maker, Baker and his team reached out to Target to stoke the company’s interest.
And they'd planned for a fast entry into the Canadian retail market:
But the company had previously decided it wanted to grow as quickly as possible if it were to enter Canada, rather than pursue a slow, piecemeal expansion. The challenge was in acquiring enough real estate to make that possible. The Zellers sale provided just such an opportunity.
And all because they thought they really could do this:
But Steinhafel may have felt justified in making such a bold move. In the three years since he was appointed CEO, he’d boosted revenue 8.3%—not a huge number, but an impressive one, considering the U.S. was experiencing the worst recession since the Great Depression. Steinhafel had joined Target in 1979, and his entire professional career had been spent with the company. Target experienced steady growth during that time, and Steinhafel had simply become accustomed to succeeding. “The company had never really failed before,” says a former employee who worked in both the U.S. and Canada. There was no reason to think Target wouldn’t be able to pull this off.
http://www.cbc.ca/news/business/walmart-to-buy-13-former-tar...
2 of these locations are within 20km of me, and not too far from 3 other walmarts within 20 minutes apart.
Target missed the boat by about 15-20 years. I entered 4 or 5 different Target locations in Canada and none of them had a full grocery selection. Targets were basically Walmarts before they began converting to full grocery stores.
Therefore, shoppers had the option to either go to a Walmart Superstore and get everything they needed, or go to Target and get 80% of what you needed, the remaining 20% being available at a grocery store.
Beyond all the data logistics issues, Target would have never succeeded in my opinion as they couldn't compete with Walmart on selection (or Great Canadian Superstore for that matter).
I feel really bad for the people who lost their jobs.. for young people in their first job, it might be okay. For older folks who probably quit a job some place else, it is really a hard experience.
Walmart stores in Toronto that I visited, definitely seemed crowded with long check outs. Other cities in Ontario, the checkouts seem to be adequately staffed. I'm surprised how different Walmart Canada is from the US operation!
Also, Target stores here usually seem to be cleaner and neater, whereas Walmart stores frequently seem to be dirtier and the shelves look at bit ransacked and picked-over.
However, this does vary a lot by location. When I lived in northern New Jersey, the Walmarts there were a horror show: nasty floors, shelves looking like people just went through shopping in preparation for a hurricane, etc., whereas the Targets were nice. The customers at the Walmarts also seemed to be all poorer minorities, black and hispanic (I'm white), whereas Target was full of white and middle-class-looking black people. However in some more rural locations in the South, the Walmarts I've seen were clean and neat (but there were no Targets around).
The one I go to when visiting Arkansas is better in almost every way, possibly owing to attention of the "home" regional management.
My favourite example has to do with winter hats. In Canada, we call them toques (it is not pronounced 'toke'), yet in Target, all the signage said 'hats'.
That sounds really small, but it was my most memorable example of a company that genuinely did not get Canadians. They treated us like Americans and, while Americans are cool, we aren't Americans!!
them generalizing a section including tuques as hats is correct, i dont think i have seen a "tuques" section in any canadian store, they would be in the hat section.
toques are hardly a canadian thing, and alot of canadians refer to them as beanies.
target did not fail cause they werent canadian enough(is anything really canadian?), they failed due to locations, business model, inventory, and technical issues on their backend.
if anything they failed because they werent "american" enough, as canadians were expecting a similar experience to USA target shopping
Yes. Many things. Watch TV? Vancouver? Nickleback? Or drake? Or pretty much 1/3 of Hollywood? Canada and canadians are very over-represented in US culture. They are just hard to spot.
Cruz 2016 -
minus drake who does alot for toronto, what do any entertainment/sports/actor/star from Canada still live in canada or represent themselves as canadian or produce a unique viewpoint that is canadian.
canadian content is usually pretty boring on TV. there have been some good original shows, but few.
i am born and raised in vancouver, continue to live here, 4th generation of my family to be born in canada.
Both Loblaws and the Brick had supply chain problems but they both recovered, mostly because they served the Canadian market.
Target, on the other hand, couldn't. Their marketing and in-store signage didn't resonate, their quality/price ratio was off, and their selection didn't meet the needs of most Canadians.
Yes. A Tim Horton's Double Double is the very definition of Canadian.
Edit: And yes, "I... Am... Canadian" (which Canadians will recognize as a slogan for Molson Canadian beer, (owned by Coors, BTW)
A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over, beginning with a working simple system.
They get fashion designers to do collaborations with their clothing line as well, which helps their image. 3.1 Phillip Lim for Target a couple of years ago sold out instantly. In general their clothing is on par with a real clothing store. I have a cardigan/jacket thing I got there in 2011 that has no holes or damage.
Walmart has a "lower class" reputation, and so do the people that go there often.
Don't get me wrong, they are both big box stores. They aren't that different under the hood, but Target managed to present itself with a cleaned-up image that attracts a lot of middle and upper middle class people who don't want to be seen at or go to Walmart.
Also, the staff are much easier to get a hold of.
Target also offers an EFT card that discounts 5% off your total and (up until this spring) kicked 1% of the total to the school of your choice. Our elementary school has earned a few thousand dollars over the life of the program. The card also gives free shipping on online orders.
So, to me, it's not an equivalent.
They intentionally understaff their checkout stations to cut labor costs. A far cry from the 80's and early 90's when Walton still held sway over operations and was able to impose strict waiting limits for customers.
You need to avoid going there at the beginning of the month, after work, Saturday afternoon, Sunday night, after 9 etc. There's either 2/30 lines open, or 15/30 with 300 people waiting.
If you go, they don't merchandise. They cut the top off a box of food and throw it on the shelf. The workers suck because the workplace sucks.
Target, the prices are same or better, selection is different (i.e. You can't get car parts or hunting gear), and the staff is much more useful.
Yes, Walmart is the preferred vendor if you are on EBT and that is why police departments will stake them out at the beginning of the month. Walmart is pretty much the place to get the most food for the buck.
I don't care about that at all, it's just that Walmart doesn't bother to do things like have more staff available.
In seriousness, as others point out, Target is generally nicer. And Wal-Mart has a bit of a "low rent" feel to it, probably more so in the U.S. south than elsewhere. Everything on the shelves seems as if it is the lowest priced item the Wal-Mart buyer could find for that category. And the shoppers, oh, the things I've seen...
I've found that this doesn't seem to broadly apply to the few Canadian Wal-Marts I've been to, though.
Wal-Mart can do as well or better than Target. There's a "flagship" Wal-Mart on the Dallas North Tollway in Plano (Texas) that is everything a Target can be and more. It's even open 24 hours, like seemingly every other Wal-Mart in the region. (That was a little bit of culture shock when I moved to Puget Sound. The Wal-Marts in the top-left corner of the map used to be open 24 hours but stopped in early 2015 for some reason.)
That Walmart has taken a dive tho. I've rarely gone the last 4+ years, but it very much reminds me of the nearby one which is more "ghetto", just with different inside paint job (not industrial white).
I basically can go to Walmart or the local grocery store in the next town or the reservation grocery store. I'm not a fan of the local grocery stores political tactics[1], so its the rez or Walmart. There is a K-mart but they just don't have the variety.
1) zoning to try and screw competitors is not nice
Pay and benefits suck too.
Today, there's a Target within walking / biking distance of my house. That pretty much seals the deal. Also, this may be unique and idealistic, but I don't shop anywhere that sells guns.
I think it's easy to blame the horrible and run down locations they took over from Zellers but people still shopped at Walmarts in similar places. In the end, it felt like the same experience we had with Amazon (or Netflix) in Canada; the shell is there with some good products but mostly lacking in everything that makes Target a fun (and addictive) place to shop. The lack of products didn't help but that had more to do with Quebec's super bizarre language police/laws.
The irony is Target Canada was at least slightly better than Walmart Canada and many MANY times better than Canadian Tire, a place that was almost always packed with people.
It's sad but I don't think Target ever had a chance in Canada.
Not even all that expensive. 10 cents each, 75,000 items, 10 checks each. $75,000 is quite a bargain for that kind of data validation.
It'd take a day or two.
(There's probably some horrible flaw with this idea)
I can see a turk system where they show a picture of the product and ask if the unit of measurement looks correct (being 2.5x off is pretty easy to guess) and if the order looks correct. They might not get the width and the length correct but the height could probably be guessed. Course that can probably be done with computer vision.
So for $75k they could get it so at least the product would fit on the shelving units. That could easily pay for itself in a day. Products that failed these two simple tests should be looked at more closely for other issues.
The lack of inventory didn't help either. The one closest to me had about 10,000 options for bath mats and bath robes. Everything else was out of stock and the food section had limited selection and higher prices than other nearby stores.
when they opened, they seemed like a bit more modern and cleaner zellers, but still in the same not so high traffic crappy locations. the zellers theme was red, so was target...
people were excited about target opening based off experiences crossing the border and shopping at USA Target.
the USA stores differed from the Canadian stores. 1)canada target didnt have the same selection/inventory of products. 2)prices were significantly different... even when factoring in the exchange rate, it was still cheaper to shop at USA target locations on a trip across the border.
walmart here, atleast in locations near me in canada are far cleaner and newer looking compared to walmart USA. most existing were upgraded to "super centers" and several more locations are opening soon where as in the states they are downsizing and closing locations.
I'm pretty young and all of my experiences were a combo of dirty, badly stocked stores, products that I didn't care about, bad fluorescent lighting, and employees who didn't give a shit. I also don't really shop at Walmart, but Walmart seems kind of sterile and organized, at least. I honestly did not know why anyone would ever go into a Zeller's - they had clothes and housewares and groceries and stuff, but somebody else seemed to do all of those things much better.
HBC bought them out in the early 80s and then started shovelling more acquisitions on top; Bonimart, Fields, Woodward's. They had enough capital to start fixing things - in the mid to late 80s your parents probably remember "Club Z" and pushing aggressively against their remaining competition to make sure they had the lowest price in town.
In the late 90s, just as Walmart was starting to show up in Canada (by buying up the burned-out corpse of Woolworth's) and threaten pretty much every brand under the HBC umbrella, HBC centralized decision making and planning in HBC's Toronto offices and under HBC execs.
K-Mart basically collapsed at this time from the same pressure; HBC opened up the purse and bought a lot of old K-Mart locations, intending to convert them. Eatons also died, and their assets were acquired by Sears.
I worked at Zellers to put myself through school briefly during this general time period, and I remember hysteria and confusion in all ranks of retail and management staff. Communication with HBC was generally command-and-control with no mechanism to individually fix brand-wide or regional problems.
Actual Bay stores in the late 90s were also doing poorly, and it was likely that Zellers was seen as a losing anchor that needed to slash margins further to compete with Walmart.
I will miss the chain. I had never really gone in prior to working there, but after working there I had gained enough weird institutional memory to be able to quickly find whatever I was looking for even in Zellers I had never visited before.
It is now basically a race in Canada to see if HBC or Sears will pull out first. Neither one of them are doing particularly well.
Canada is, in general, not kind to its department stores. http://ottawacitizen.com/business/local-business/canadas-big...
"Raise you $1.6bn"
"Raise you $1.8bn"
"I'm out, enjoy Canada"
> "While SAP might be considered best in class, it’s an ornery, unforgiving beast. Sobeys introduced a version of SAP in 1996 and abandoned the effort by 2000. (It wasn’t until 2004 that the grocery chain tried again.) Similarly, Loblaws started moving to SAP in 2007 and projected three to five years to get it done. The implementation took two years longer than expected because of unreliable data in the system. Target was again seeking to do the impossible: It was going to set up and run SAP in roughly two years."
> "The company wasn’t doing it alone, however, and hired Accenture (which also worked on Loblaws’ integration) as the lead consultant on the project. [...] Accenture, which Target hired as a consultant on SAP, said in a statement: “Accenture completed a successful SAP implementation for Target in Canada. The project was reviewed independently and such review concluded that there is no Accenture connection with the issues you refer to.”"
> "The company had purchased a sophisticated forecasting and replenishment system made by a firm called JDA Software, but it wasn’t particularly useful at the outset, requiring years of historical data to actually provide meaningful sales forecasts."
> "The depots were hampered by other factors, caused by lingering data problems and the learning curve associated with the new systems. Manhattan, the company’s warehouse software, and SAP weren’t communicating properly."
> "The auto-replenishment system, which keeps track of what a store has in stock, wasn’t functioning properly, either. Like many other parts of retail, replenishment is an exacting science that can go haywire without correct data. At Target Canada, the technology relied on having the exact dimensions of every product and every shelf in order to calculate whether employees need to pull more products to fill an empty rack. Much of that data was still incorrect, and therefore the system couldn’t be relied upon to make accurate calculations."
> "To add even more headaches, the point-of-sale system was malfunctioning. The self-checkouts gave incorrect change. The cash terminals took unusually long to boot up and sometimes froze. Items wouldn’t scan, or the POS returned the incorrect price. Sometimes a transaction would appear to complete, and the customer would leave the store—but the payment never actually went through. The POS package was purchased from an Israeli company called Retalix, which worked closely with Target Canada to address the issues. Progress was maddeningly slow. In 2014, a Retalix team flew to Toronto to see first-hand what Target was dealing with. After touring a store, one of the Retalix executives remarked, “I don’t understand how you’re using this,” apparently baffled the retailer managed to keep going with so many bugs. But Target didn’t have time to find a new vendor and deploy another technology. [...] Unlike SAP, Retalix is not an industry standard, and why Target chose it isn’t entirely clear."
> "Like SAP, the replenishment software was brand new to Target, and the company didn’t fully understand how to use it."
http://www.canadianbusiness.com/the-last-days-of-target-cana...
The Maclean's copy of it is unreadable due to the ridiculous font combined with narrow column width.
That reveals that it was posted before (https://news.ycombinator.com/item?id=10952937), but since there is active interest in this story we'll leave this one up and merge those comments here.