The logo of Target, a discount retail store, is pictured in Richmond, British Columbia January 15, 2015. Target Corp's abrupt decision to withdraw from Canada is troubling news for many mall owners, as the most obvious potential buyer of property assets - Wal-Mart - is expected to cherry-pick from Target's 133 locations. Minneapolis-based Target, the second-biggest U.S. discounter, obtained creditor protection for the Canadian unit and said on Thursday it will seek to sell real estate assets, including leases for some 14.7 million square feet of retail space.BEN NELMS/Reuters
Target's brand is in the dumps in Canada. But it has very little to do with what one would normally associate with branding.
Canada rolled out the red carpet for the brand with the red bull's eye. Anticipation for the launch, fuelled by cross-border shoppers, was high. The retailer received reams of free publicity in the form of press coverage of its Canadian debut. Its early advertising was polished.
When things went downhill, its PR strategy was strong: In June, the retailer acknowledged its flaws and released a video – now somewhat pathetic to watch – featuring employees pledging to do better. But for retailers, inventory management is crucial to customers' perceptions of a brand. If shelves are out of stock, and customers leave empty-handed, research has shown that many of them will not come back.
"Up to 83 per cent of consumers in some product categories opted to visit an alternative retailer when facing a stockout," said Onur Bodur, an associate professor of marketing at Concordia University, whose research focus has included shelf placement and retail marketing. "These figures were higher following a second stockout occasion."
For Target, this problem was exacerbated by people who shared photos of messy, half-empty shelves with their social networks on services such as Twitter. Even people who had not visited got the message.
"There was a brand perception that stuff wasn't there, so when it was back-to-school, or people needed new clothes for the kids, Target wasn't top of the consideration set for their shopping trip. Because people hate wasting time," said Jason Dubroy, vice-president and managing director of ShopperDDB, a division of ad agency DDB Canada that focuses on marketing that takes place at the point of purchase, in stores.
High product variety and more inventory have both been shown to correlate with higher sales.
That's why for retailers, the practice known as "facing" is so important: not just keeping stock in, but moving products toward the front of shelves every day to make the store look full.
Full shelves communicate value, and variety – key indicators for customers that they will be able to get what they want. Partly empty shelves don't just take away from that message; they can also give an impression of disrespect toward customers, through a lack of effort. It is the retail equivalent of someone who shows up for a date in sweatpants.
This was especially a problem for Target because cross-border shoppers already knew what to expect from the brand, and immediately recognized how it differed in Canada.
Six months after Target's launch, Toronto-based Level5 Strategy Group surveyed roughly 1,200 Canadian shoppers about their perceptions of eight major retailers. Seventy per cent of them had already had contact with Target across the border.
"There were alarm bells even then. … Their expectations, not just of the product and the look of the store, but how the brand made them feel, were already established. Target was viewed as modern, confident, a little more streetwise," said Level5 managing partner and founder David Kincaid. "It was not the same Target [in Canada]."
When stockouts happen, as much as one-quarter of shoppers keep browsing but do not buy a substitute for the product they really wanted, according to a 2004 study of more than 71,000 consumers around the world. In the study, 21 to 43 per cent went to another store to find what they were looking for. The researchers estimated that for an average retailer, those customers who leave amount to roughly 4 per cent in sales lost.
Target's problem was convincing those customers to come back. Faced with doubts about the reliability of the shopping experience itself, consumers were harder to sway with marketing. And given how quickly the problems appeared, a second chance became a hard sell.
"The most important touchpoint is always the first … there were problems right from the get-go," Mr. Dubroy said. "They raised everybody's expectations so much."