As Canadian based retail advisors, we have been inundated by business writers on both sides of the Canadian/U.S. border asking about what is happening with Target’s foray into Canada and what they should do to fix their problems.
It is now over a year since the first stores opened and things should be getting better. To test this, we recently went to several of their newly built stores. On the Labor Day weekend, Target dropped a very attractive book in leading newspapers that features fashion, cosmetics, and home décor products with style and attractive prices. As well, on a weekly basis, they are very promotional for household basics in their flyers.
Up to until now, as analysts of the retail sector, we have been very bullish on Targets ability to get on track in Canada. After our most recent visits, we question our assessment.
Our observations in Canada have been that the Target marketing machine is much better at generating demand for some of their cool products than their operations and merchandising groups are delivering on the promise. Our field trips confirm much of what we believe to be a significant challenge for Target’s new management.
Key observations were:
On the good side…
- The two cosmetic lines featured in the fashion book were in stock and on end cappers which we suspect may be done by the supplier.
- There were plenty of staff in the store and the back store.
- They had instructions to make customers laugh – at the cash desk.
- Staff did know about the fashion book and said that the merchandise would be in soon – everyone was very helpful and pleasant.
On the not so good side…
- There was very little recognition that by September most stores have much of their fall fashion story on the floor.
- None of the fashion items for either men or women were in stock and featured on the main aisle.
- The store continues to have significant out of stock issues with empty shelves and fixtures.
- Store shelves are not restocked, especially for promotional items, in spite of having plenty of staff on the floor and in the back store.
- The in-store presentation is as bad or worse than Walmart – signs and merchandise on fixtures do not match with few coordinated packages on fixtures to encourage multiple purchases.
- Store staff, when asked about promotional items that are not in stock on the floor, need to be prompted to offer a raincheck or check to see if they have replenishment stock in the back store. Some even advise us to visit a neighbouring store a few kilometers away in case this store may have the item in stock.
- When store staff are convinced to check stock availability in the back store, the delay to get it into the hands of the waiting customer is extremely long.
Target Canada is missing on Retail 101 – have the merchandise in stock when the advertising drops. It begs that question – Who is responsible for in-store merchandising? Who is coordinating schedules for merchandise packages? How much longer will it take to get the supply chain fixed or at least functioning better? Does the senior management team spend enough time in the stores? Discipline comes from the top.
It is our contention that price is not Target’s biggest issue. The biggest challenge is to provide the fun merchandise at great prices that Canadian’s have seen in the U.S. and provide week to week value on consumables. The Target marketing machine keeps giving Canadians a glimpse of what could be, but how long will they disappoint at the store level before Canadians will just ignore the marketing.