Context
In January 2011 the US retail chain Target announced it would buy the leasehold rights to stores of the Canadian chain Zellers for $1.8 billion. The company decided to open 124 stores in Canada by the end of 2013. The first stores opened in March 2013.
Symptom
Shelves in the new stores were often empty, even though the distribution centers were overflowing with goods. Shoppers who knew Target from trips to the United States expected the same prices and range and did not find them.
Cause
A new SAP-based supply chain management system was implemented on a compressed schedule, and product data was entered by hand with errors. According to published reports, the team lacked people with experience of such a system. Entering with a large number of stores at once left no room for testing at a small scale.
The fork
Enter gradually, testing logistics, data and shopper expectations on a few stores, or open the whole chain at once, since the leases had already been bought.
Decision
The company opened more than a hundred stores in its first year of operation.
Execution
Problems with supply and data showed up in all the stores at once. They had to be fixed on a live network while shoppers were forming their opinion of the new brand.
Outcome
On January 15, 2015 Target announced its exit from Canada. 133 stores closed, and about 17,600 people lost their jobs. By estimates, the Canadian unit's operating losses exceeded $2 billion.
What it means for you
A new market is tested at a small scale: one city, one channel, a few locations. A mistake at five locations costs a lesson; a mistake at a hundred costs the market.
- Which assumptions about the new market have you not yet tested in practice?
- Are your data, logistics and processes ready to work in another country?
- What is the smallest scale you can enter at to test the main thing?
We would start by listing the assumptions about the market and finding the cheapest way to test each one before large investment.
Key dates
| Year | Event |
|---|---|
| 2011, January | Zellers store leases bought for $1.8 billion |
| 2013, March | First stores open in Canada |
| 2013 | Plan to open 124 stores by year end |
| 2015, January 15 | Exit from Canada announced; 133 stores close |
