Target In Canada

Market Failure is a situation where the allocation of goods and services in a specific market is not efficient. There are many types of market failure that are illustrated in inefficiency, monopoly power, missing markets, incomplete markets, De-merit goods, negative externalities, property rights, information failure, unstable markets, and inequality. Target is an upscale discount retailer that provides on-trend merchandise at attractive prices that a regular consumer could be able and willing to pay in clean, roomy and guest-friendly stores. Target has 1,795 stores and 38 distribution centers in the United States. The CEO of Target Brian Cornell launched some of their retail stores In Canada as a part of their international expansion. 

Two years ago Target opened 124 stores in one fell swoop, but their stores had empty shelves, dreary location and “unexciting” merchandise which failed to entice consumers in Canada. The international expansion caused Canada $5.4 billion where their total net loss was estimated at $2 billion which was enough for Cornell , who was busy with satisfying American consumer’s needs in the United States, to realize that he’s business can’t operate anymore in the Canadian Market. “Our Target Canada business had reached the point where, without additional funding, it could not continue to meet its liabilities. Simply put, we were losing money every day,” Cornell said; and therefore it was obvious that they had to shut down their market, but he question is: why did this happen ? what did they do wrong ?! 

Target bought in 2011 the store leases of the discount chain, Zellers, for $1.8 billion from HBC which give target an Immediate cross-country footprint and spared it the expense of building new stores and renting land , they thought they cut some of the costs but what really happened is that they didn’t know that Zellers stores were located in areas not frequent by the middle class customers which is the segment they are targeting.  Also, Target opened 124 stores within such a short period of time which have led to a huge destruction and havoc with inventory planning which have caused big problem with stock, disappointed consumers expectation that they would see while shopping at target stores across the borders in the United states. With bare and empty shelves, Canadian consumers couldn’t shop even if they wanted to do so.
Even though target was popular on being a treasure trove for trendy but affordable high quality merchandise but many many customers still saw not as compelling as Wal-Mart. speaking of which the aggressive Wal-Mart pricing was a factor that led to the failure of target in Canada as well where they found their selves having to compete with Wal-Mart Pricing, where Wal-Mart have been in Canada since 1994 giving it the advantage of protecting its Canadian market share.

Furthermore, I think that target should have studied the case of expanding their market internationally in a more careful way. Their poor location choice proves the lack of information they had on the Canadian market, when Target segment the middle class they should locate their markets in middle class living areas; Also, they should have done fewer stores, but better ones, a 124 stores are a lot to handle all at one but wouldn’t be better if they hand 50 stores that are full of products that could actually be sold to people who want to buy from target instead of consumers going to stores and finding nothing to buy there ? Lack of information and the direct connection between it and the failure of target was also represented with the competing and over compelling price that Wal-Mart was offering their Canadian consumers. How was it possible for target to go into a store without getting enough information about their competition such as their prices , their market share, their power and their customer base. It was obvious that Target’s CEO was enjoying the 3% increase in their sales during holiday season and forgot how to manage and plan expanding their store internationally.