Why Target?

This article on Marketing Magazine’s website, and many more like it, are looking at Target. The U.S.-based retail chain is having some trouble adapting to Canada’s retail market.

I have no idea why Target’s leadership thinks the company has a chance of competing in the Canadian retail landscape using its current operational strategy. At the same time, I must tip my hat at the company’s marketing department: The amount of earned and paid media surrounding the retailer’s entry into Canada meant it was almost impossible to ignore.

Target is a new player to an already crowded game. Massive, all-under-one-roof discount stores aren’t new to Canadians, though the format is slightly different. Costco is one-stop shopping. Brands under the helm of President’s Choice like Real Canadian Superstore and Wholesale Club are the same.

Target has been successful at generating a positive perception of its stores with a pre-launch media campaign, but is it following through on that perception? Customers do not think so:

“…various studies found that consumer perception of the Canadian stores was lacklustre, with complaints ranging from stores running out of some products while others considered the prices too high.” (Canadian Press, as quoted by Marketing Magazine, 2013)

Target Canada is facing two problems. Poorly managed operations in relation to promises implied by promotional campaigns and a loyalty program that makes no sense given market conditions.

Inflated Expectations

“The acknowledgment that Target’s entry into Canada has been underwhelming is a stinging admittance by the company, especially since the discount chic chain generated such a high level of consumer anticipation and hype that’s rarely experienced in the retail industry” (Canadian Press, as quoted by Marketing Magazine, 2013).

Generating buzz is awesome. It feels good and begins generating a (hopefully positive) perception of the brand. However, the trick is matching or exceeding the hype. It seems like Target’s marketing department has outstripped their operations department.

The initial buzz and excitement has been followed up by nothing good. Fisher says the company is “learning new systems and processes, using its technologies more efficiently, educating a new workforce and trying to improve replenishment processes” (Shaw, 2013). All of those are fair – if your company is test marketing several stores in a new area. Opening day will rarely be pefect, but it seems that Target’s troubles go deeper than a few kinks to iron out.

Market Conditions

“We have no intention of starting a price war…” said Fisher (Kopun, F., 2013, B2).

That statement is noble, and I am glad Target has decided against a price war, though it does pose a problem: higher prices than the competition. The nature of a discount store is cost leadership, so Target must compete on price and/or ensure it is differentiated from its competition. Wal-Mart exists. Costco exists. Both retailers compete on price, and Costco competes on perception-of-service. So how does Target compete?

“Target defends its prices by saying that consumers save more when combining additional discounts applied to shoppers who pay using its credit card.” (Canadian Press, as quoted by Marketing Magazine, 2013).

So Target’s advantage is a credit card that provides a discount. A good concept in terms of offering a discount-based loyalty program, the problem being that is yet another credit card, is an obvious attempt at mining customer data, and is not exciting. In an era defined by recession and targeting the poor and uneducated with debt they cannot handle, hawking a credit card is like trying to sell hiking boots to a person with a broken knee.

The Bottom Line

Target Canada is a welcome addition to the retail landscape – as long as it can compete with other retail giants. A discount-garnering credit card is not a competitive advantage. Unstocked shelves and poor service are not advantages. Without a real advantage, the company cannot not put any pressure on other discounters to better serve Canadian shoppers, thus limiting the value of even having the retailer in Canada.

In the hopes of encouraging Canadians to visit target more often, Target Canada President Tony Fisher says the company must…

“…redefine the perception of what a trip to Target means,” Fisher told analysts. (Canadian Press, as quoted by Marketing Magazine, 2013)

There was a gigantic pre-launch media campaign. The implicit and explicit cues in that campaign shaped current perception of what going to a Target store “means” – and the money is already spent. If the chain wants to compete, it cannot rely on marketing to recreate how Canadians see the store.

In short, it appears like Target has its head in the sand. Amid operational failures and marketing over-extension, the C-suite turns to marketing to manipulate public perception. There is already a “meaning” behind Target Canada, so focus on what the company has already got.

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What do you think about Target? Do you think about Target? Leave a comment and let me know what you think!

 

References

Kopun, F. (2013, August 22). Target admits it has a lot to learn in Canada: Discount retailer reports 13-per-cent drop in second-quarter earnings. Toronto Star B2.

Canadian Press. (2013, October 30). Target admits Canadian launch fell well short of expectations. Marketing Magazine. Retrieved from: http://www.marketingmag.ca/news/marketer-news/target-admits-canadian-launch-fell-well-short-of-expectations-92454?

Shaw, H. (2013, October 30) Target Canada still plagued by price perception problems as sales fail to meet expectations. Financial Post. Retrieved from: http://business.financialpost.com/2013/10/30/target-canada-still-plagued-by-price-perception-problems-as-sales-fail-to-meet-expectations/

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