The Target Story by Bill Chastain

Author:Bill Chastain
Language: eng
Format: epub
Publisher: Harpercollins Leadership
Published: 2020-08-26T00:00:00+00:00

Speculation about Target expanding into Canada began to circulate in the aftermath of the 2004 sales of Marshall Field’s and Mervyn’s. The $5.3 billion boost gave Target Corporation an excess of cash. It was easy to see that Target could make a strategic move by acquiring Zellers, a Canadian discount chain. Such a move would expedite the company’s entrance into Canada.1 However, Target did not head north of the border at that point, even though Canada appeared to be an ideal landscape for Target to operate in.

The financial climate played a role in the decision. By 2008, deregulation had thrust the United States into a financial crisis, bringing about the worst economic disaster since the Great Depression. Few were immune from the effects of that recession, including Target.

Still, a Canadian invasion continued to percolate until 2011 when Target began negotiating with Hudson’s Bay Co., to purchase 220 Zellers leases. Hudson’s Bay had bought Zellers in 1978, and the Canadian discount chain performed well until Walmart moved into Canada in 1994. Walmart’s success cost Zellers market share, and eventually forced the chain’s management to recognize that its leases had more value than its operations. That prompted a desire to sell the leases and made Target the ideal suitor, particularly given Target’s desire to enter Canada and experience rapid growth.

Zellers’ management alerted Target to their intention to sell its leases. They also made it known that Walmart had interest. Even though Walmart eventually withdrew, Target still paid 1.85 billion Canadian dollars to purchase the 220 Zellers leases from Hudson’s Bay Co. At the time, Target operated 1,752 stores, all within the United States.

After spending an average of $10 million to $11 million per location to convert each Zellers, Target opened fifty stores during the first half of 2013, its first year in Canada.2 The early returns were not encouraging.

A month before Target’s first Canadian stores opened in March, the company held a meeting of senior-level employees in Mississauga, Ontario. The goal of the meeting was to evaluate whether Target was ready to open its doors on schedule. At risk was the first impression Target would make on Canadian customers.

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