Learning From Target's Global Expansion Attempt

SAN FRANCISCO—Target's move into the Canadian market was less than successful, and the reasons have much to do with not understanding the mindset of local customers, Anjee Solanki, Colliers International's national director of retail services USA, tells GlobeSt.com. We spoke exclusively with Solanki about what went wrong and how other retailers can avoid the same mistakes.

GlobeSt.com: What do you feel are the main reasons Target has not been successful with its international expansion?

Solanki: If you compare what Target did to what Walmart did in China, there are a lot of similarities. Sometimes retailers feel they are prepared to expand internationally because they have elevated their brand; made sure it's recognizable; and created targeted, quirky, crafty ads, but that doesn't preclude doing their due diligence with how shoppers behave in a particular market. It's like the shampoo example I gave in the airport retail story. Don't think that because you're a strong western brand that immediately gives you the cachet or opportunity to walk in and open shop immediately. It's vital to understand the consumer and how that consumer behaves.

For example, we recently pitched a candy company for a global expansion, and during the pitch the team that opened a location in Shanghai made the assumption that the brand couldn't fail because it was so popular in the US and the World. But you have to pay attention to the locals and have a captive audience from a density standpoint; if you understand what wows them, you can increase sales from a sustainability standpoint—tourism traffic is the icing on the cake.

Target didn't understand the Canadian guests. Prices were apparently higher than the guests expected, especially guests in Vancouver and Toronto, who are able to do price comparisons with US stores and realize the Canadian store prices were higher than what they were used to in the US. Pricing is everything to a shopper, and that's been Target's story from day one. It's overshadowing all the things they're doing behind the scenes with their really crafty, iconic advertising. Zac Posen is great, but when you can only afford to get two rounders installed in-store, it's no longer a great deal.

They also didn't carry the right merchandise. Cherry Coke is really popular in Canada, and they didn't have that available in the stores. Why would I want to circle the parking lot and walk massive aisles if I can't find the product I'm accustomed to buying? The combination of not having the right product, not understanding the market, not being well-stocked, along with the higher prices, led to its failure in that market.

GlobeSt.com: Do you think Target can recover from its mistakes? How?

Solanki: Apparently, Target's focus will be more in the US and in urban markets right now. I just spoke with the brand's US broker, and if it's able to roll out 30 or 40 small City Targets, which is what they're calling these smaller stores, even if they're not in urban environments—then it can recover. These are small-format stores that are focused on grocery, grab-and-go, home accessories and bed and bath products. It can forego alcohol sales in some markets, and it's a leader in the pharmacy piece.

GlobeSt.com: What can other big-box retailers learn from Target's errors?

Solanki: It goes back to understanding what the right footprint is and which SKUs you should have. It's similar to what's happening with Alibaba, China's leading e-commerce company. As Alibaba embarks on a global expansion, we're hearing a lot of retailers in any format are using Alibaba's e-commerce program to test  how consumers are going to behave based on what's selling on the site. So when they decide to open a brick-and-mortar store, they can operate it efficiently and successfully.

GlobeSt.com: What else should our readers know about Target trying out big-box retailing in other countries?

Solanki: If there's any opportunity with Target in terms of further expansion, it's in Mexico. But right now, it's looking at other opportunities within the US.