After many Canadians traveled to the US to shop at Target stores, the management team decided to expand into Canada. Short lived, it then closed 133 stores after estimating profitability would not come for 6 more years (2021). What happened?
The economics were completely different. First, the supply chain is challenging, as the Canadian geographic space is long and narrow…like Chile sideways! This resulted in shelves being empty, with less selection of merchandise. Second, the costs are different (wage rates, taxes, transportation and distribution). These two influenced pricing to be 10-15% higher, which defeated their tagline of “Expect More. Pay Less.”
They are not the only ones: Marks & Spencer from England and Dunkin’ Donuts also struggled, as did Canadian Tire and Tim Hortons during attempts to enter the US market from Canada.
Counter this experience with J.Crew, who entered in 2011 with one Toronto store. They received feedback, changed their processes for the region, and quickly grew to 16 stores. They learned the market and expanded from there.
Does your value proposition cross the border?
