Beleaguered retail empire Target announced weak-ass first quarter earnings today, thanks in large part to its disastrous Target Canada division, which lost $211 million just this quarter. How did Target Canada become the laughingstock of the retail industry? A Target Canada veteran explains in detail, below.
It's hard to overstate what a fiasco Target Canada has been; in a year, it's lost nearly a billion dollars. It was Target's first major foray into international waters, and was supposed to be a step towards building a global empire. Instead, it has been described as a "supply chain disaster," as well as a "botched" effort to foolishly run a Canadian operation with American executives. The main problem is that the stores just suck: "Analysts say the store's prices aren't competitive with the likes of Canadian operations of Walmart and Costco, and that merchandise is consistently out of stock."
Yesterday, the company fired Tony Fisher, the head of Target Canada. Also yesterday, we received this dispatch from a management-level employee at Target Canada, who earnestly explains just what went wrong. Enjoy.
I am a Canadian and I was hired in early 2012 to take on a leadership role for Target Canada stores. From the beginning, a lot of emphasis, time and energy was put into in my training. The primary focus of which, was acclimating to the Target "culture" - I spent months training in the U.S. at stores, District and Regional offices. I can say that I agree with the previous poster on the "passive aggressive" nature of Target's performance management. The overly sincere "we're here to HELP you" approach was a constant drain on the senses, as it was akin to swimming with smiling sharks. The real problems, however, became much clearer after we started opening stores.
We've heard a lot about the Guest being unhappy with the Target Canada experience, but I can say with confidence that for MANY of us working there, the "Target experience" was not what we expected either. I can disseminate (from my perspective) why the company finds itself in the predicament it does today, and hopefully enlighten some readers on how ingrained and widespread the problems are.
International Assignees or IAs - these are key Team Members from the U.S. at various levels of leadership who came to Canada for a "limited timeline" under the guise of helping set up the stores and teams for success. Instead, we found that these folks were not guides or resources, as much as they were obstacles to progress. If it didn't come from/work in the U.S. then it was not a discussion point. To come to a country as large, demographically and regionally different as Canada, and assume that the same "playbook" used in the U.S. would work in Canada was incredible. The inability of the "IAs" to think and work beyond this led to us attempting to Xerox the U.S. store culture (for Team Members and Guests) instead of develop one that is tailored to Canadian tastes and attitudes. As things began to go downhill, the IAs were extremely pointed, and openly opined that the Canadian Team Members worked "differently & less hard" and overall "took less accountability" than they were used to in the U.S. That was an exact quote that came from my boss (an IA himself). Many of these IAs were scheduled to return to the U.S. this year... And most have been asked to remain. So much for the claim that the Canadian Target business be "run and operated by Canadians".
A highly prescriptive & misguided operational approach – now as an experienced retail professional, I can appreciate and frankly, I prefer an environment where I can do what I do best: execute the plan. But when the plan is so flawed, it became clear that we were doomed for failure at the start. Target is notorious for driving out innovation, and in most cases that is required for a large, multinational retailer with expected standards of operation. But when those highly prescriptive plans only highlight our failures, there's no question we fed the beast when it came to Guest dissatisfaction. Stores have scores of empty shelves, endcaps, sections that could easily be filled with inventory on-hand, however Target DOES NOT WANT US TO FILL THEM. The POG (planogram) must be executed 100% flawlessly - even if it means the shelves are empty because what is supposed to be there isn't on hand right now. In other words, we had way too much of things that we didn't need, and not enough of things we did need. Basics like milk, food or consumables that drive repeat business are always out of stock. Store Leaders would catch major crap if they chose to fill a 4 foot shelf with more pillows (that were in stock) versus leave it empty (because there was no bedding on-hand that was supposed to be put there). Working in the store, we know empty shelves look terrible. Target would not allow us to make the decision to fill a 4 foot shelf. Again, I'm all for ensuring integrity of the POG (that's the only way to truly determine what's in/out of stock), but that was another problem that was self inflicted by...
Store Inventory and Distribution problems - simplest way to put this, is that you can't sell it if you don't have it. There was LOTS we didn't (and stores still don't...) have. Target had to open 124 stores in less-than one year, but they also had to open 3 national distribution centers to service those stores, the HQ in Mississauga Ontario, and many Regional and District offices throughout the country. The undertaking was so aggressive; it's little wonder that the ability to stock the distribution centers with the "right" product (e.g. what stores actually needed) was an afterthought. Did you know that there is no way for stores to know what is at the Distribution Centre, and what is arriving each day by truck? Stores have ZERO idea. You could hope/pray and expect one thing, and open a full 54 foot trailer full of something completely different (and usually do). What kind of system is this? Unique to Canada as the U.S. has a different system altogether (one presumably that works). What do you do then? You stock and fill the shelves in the backrooms. The front of store & shelves remains empty.
Compromised expectations by Guests - So put yourself in the role of a Store Leader; you have empty shelves and a stockroom packed with stuff you don't need/already have out. You could fill the empty shelves with some of that product but... You'd get nailed for not maintaining the Planogram (you get several passive aggressive coaching visits by senior leadership almost weekly – and they check for this). The Guest has NO IDEA that it's such a crap-show - and frankly, they shouldn't care. A lot of noise has been made about the prices not being comparable to pricing to the U.S. but I think that's only a small part of it. Pretend you're a Target Guest. You come in to shop and spend your money and you see... Empty shelves. What you want and need is not available. Not last week, yesterday, today or tomorrow. You are disappointed because you WANTED to be a Target Guest, and now you can't even get milk or eggs on a regular basis as those products are rarely in stock, never mind buy the cute dress/purse, etc. that Target so wants you to buy at their store. Target failed to make the stores compelling enough to change your shopping habit. You don't trust them with your shopping because they haven't delivered with their ability to stock what you want to buy. What does the price in the U.S. mean when you don't have anything to sell here in Canada anyhow? So, nothing to sell means sales are below forecast. What is the impact of that? Well, the most immediate is to Team Members.
Unrealistic expectations of Team Members - In the time I was with Target Canada, we participated in significant staff reductions that were mandated by HQ and Senior Leadership. In some cases, these "rightsizing" exercises resulted in reductions of almost 40% of overall store headcount. Have you been to a Target store in Canada recently? If you go with your kids, you likely outnumber the staff on duty at any one time. The service culture that was so important to Target (why we were "better" than the competition) is now non-existent. The toll this has taken on Team Members is shameful. 99% of Target Canada Team Members are Canadians, the vast majority of whom left other jobs (that they liked and were good at) to join Target Canada. The recruitment of talent was such an undertaking as we only wanted the best in retail working for us. Now you have a 1 in 3 chance you'll be "rightsized" out of a job. As with most "rightsizings", the headcount changes, but the level of work remains – it's just divided among less people. Say you get to keep your job – your reward for being a valued and high contributing Team Member is that you get to do MORE work, while many of your colleagues and friends are let go. Not exactly a cheerful work environment. Did I mention that many of the International Assignees that were scheduled to return to the U.S. and contribute virtually nothing in terms of being subject matter "experts" remain?
Target coming to Canada was a complex problem, many saying it was rushed, and it's true. We HAD to renovate (in most cases extensively) 124 old Zellers locations within a 1-year period across the country after taking on the leases, as the major landlords would not allow for these stores to be closed for longer than that. Faced with stiff penalties (and complete ownership of unfinished stores) we rushed to hit a deadline that severely undercut our ability to roll out the stores and experience we wanted to. The seeds of Target Canada's problems were sown way before the first store even opened – it was with the flawed plan and dogged determination to execute it anyway. I learned first-hand the effect of this. I was ultimately also part of a restructuring and am no longer with the company. I do have many friends that are still there, however, and the prospects for them continue to be grim. Overall I'd call my time with Target frustrating because it was an unfulfilling experience that did not leverage the experience and talent of the people they hired.
[Photo: AP. You can reach the author of this post at Hamilton@Gawker.com]