Back in January of this year, Joe Castaldo published an article through Canadian Business magazine. It has a relatively innocuous title — “The Last Days of Target” — but the sub-title gives you a hint of the content…”The untold tale of Target Canada’s difficult birth, tough life and brutal death”. I didn’t see the article at the time, and I’m not even sure I would have clicked if I had. After all, wasn’t the demise of Target relatively straight-forward?
It seemed so to the casual observer. Towers, K-mart, Woolco, Zellers…all of them went down-market, bottomed out, and couldn’t make it work. Enter Target to try and tread the same path with a hopefully different ending. One more akin to Walmart. I’d been curious about Target when it opened, in the same way I am curious when I see a coffee shop open and close in a location, only to be replaced a few months later by, yes, you guessed it, another coffee shop. Particularly when it isn’t part of a chain that will sustain it through the lean start-up months…somebody else just tried the same thing in the same spot and went bust. Yet here is someone else dreaming their dream, and repeating the same process, options, and outcomes.
When I visited Target, I saw slightly better clothing options than the previous Zellers, prices were good, nothing that stood out in electronics, toys, etc. that said “buy me”. And, while I did buy a few things over time, I did notice a lot of empty shelves at times but far more importantly? Empty stores. No one was shopping there. You could shoot a cannon through the store, just as you could have through most Zellers outlets, particularly the one in the same location previously. Some people said Target would make money off the groceries and household consumables, but that’s not really a draw for me. I like shopping at PC stores or other various grocers. And Shoppers Drug Mart serves me just fine. I wasn’t their prime demographic, true, but I’m not against saving money if the place is reliable.
Yet reading Castaldo’s article is like reading a mix between a Harvard Business Case and a Stephen King horror novel. The errors and screw ups and just complete incompetent management behind the scenes are mind-boggling. Back when I was in university, we did a “practical” strategic analysis on a local recycling company. We were all young business students, wanting to help them plan their strategic future, we were going to help them figure it out, bring our academic excellence to bear. After working with them over a few weeks, it became painfully obvious — their biggest threat was their own operation. They needed to make sure they could get the big doors open at the factory reliably EVERY morning so they get the trucks on the road for pickups, long before they could start thinking, “What’s next?”. And that was our recommendation…forget the future, you got to make sure the doors are open. After reading the article, I’m left with the same reaction — forget all their business acumen, how did they even get the doors open on the first store?
The article is awesome, but here are some of the highlights:
- they couldn’t figure out basic distribution from warehouse to the retail stores, and to be able to restock … basic principles stores have been doing for years yet they ended up with extensive empty shelves in stores…it even took them 2 years to figure out that dates for delivery from vendors were being interpreted as shipping dates instead of when they should arrive…2 YEARS????;
- choosing SAP to integrate all their systems with a two-year window and not paying enough attention to data integrity (see this excerpt: A team assigned to investigate the problem discovered an astounding number of errors. Product dimensions would be in inches, not centimetres or entered in the wrong order: width by height by length, instead of, say, length by width by height. Sometimes the wrong currency was used. Item descriptions were vague. Important information was missing. There were myriad typos. “You name it, it was wrong,” says a former employee. “It was a disaster.”)…end result? Only 30% accuracy;
- registers spit out the wrong change or charged the wrong prices or often times confirmed credit card payments that hadn’t actually gone through;
- massively ambitious launch schedules; and,
- insanely optimistic sales projections, particularly when they decided not to try and compete on groceries to get people into the store given the level of existing competition on groceries in Canada.
The standard explanations for the scope of the disaster are there…nobody wanted to be the bearer of bad tidings, they tried to make something work with new untested techno systems rather than adjusting working solutions, leaders were not experienced battle-tested problem solvers, over-extension happened before solidifying the basics, a lack of training…the usual suspects. All knowable though.
However, two examples really stood out for me. First, their internal business analysts switched off the “warning” indicators in their software for stock replenishment so that they wouldn’t look bad (not unlike removing the battery in your fire alarm because you don’t like the noise instead of seeing why smoke is filling your house). Second, one week they released their new flyer and every item on the first page was out of stock before the stores even opened that week.
While they fixed a lot of the issues, it was too little too late. Kind of like the classic cliché, they didn’t get a second chance to make a good first impression.
As an aside I love the reference to their decision to use SAP though…that decoding it was like peeling an onion, there were many layers and it made you want to cry.
Hard to believe that a company the size of Target could get SO many things wrong, and some of them pretty basic as well as known pitfalls to avoid.