Retail shake up

Bidding adieu to 3710, I was  a bag of mixed emotion. For the non initiated, 3710 is the number of the store at Bonnie Doon mall in Edmonton, Canada. It is one of the Target stores, part of the giant U.S retailer’s expansion into Canada two years back.

All through the wind down period,  the questions came fast and furious. Yes, we knew we were not achieving some fundamental milestones, that we were facing issues especially of comparison with the U.S stores, pricing and oh so much more.  Yet, over the near two years of its existence in Canada no one ever dared bet  on such a hasty retreat.  

Ironically even the customers or guests as we called them in Target parlance, were unabashedly asking us why the company decided to leave just as Canadians were getting to know them? Telling the staff  how they love Target and how  they never wanted it to go. One of them told me, “why did they go so soon? We were just getting to know them and love them.”Another one said, “I am sad Target is leaving. They never gave us the chance to love them. They came for too short a period of time.”

In the back rooms of the store the staff echoed just one sentiment, “wish you guys had  expressed this earlier.”

A lot of the discussion was always  about how they should have waited and improved  instead of winding down operations.American companies have a history of trouncing opposition political or business.  As a journalist having covered Coke and Pepsi and Enron brow beating their way into developing markets, Target’s retreat was a complete surprise. I spent many nights  anguishing about the weakening mettle of American companies. Where was all the pluck? Most of all where was all the innovative marketing, thorough understanding of competition and  the pre-launch research?  

In retrospect, Target’s pluck was in daring to make a hasty retreat from Canada. It was the courage to acknowledge a mistake and make an orderly exit without succumbing to the pressure of shame in retreating as hastily as it had come. The pluck was in the forethought for its Canadian  employees – creating a fund for extended  compensation even after closure.

It was in the wisdom to  realise the danger of sinking the US operations while trying to keep the Canadian boat afloat. This especially as it coincided with a huge data breach in the US in 2013 that resulted in personal  information leaks of over a 100 million customers, eroding brand confidence built over decades of existence.

Long term low oil price prognosis for Canada reducing average middle class earning capacity and surplus income was perhaps another  indicator that an extended stay was not a guarantee to increased consumer spending.  The falling Canadian dollar would further exacerbate the price difference between Canadian and US product prices.In my mind there was no doubt that it must have taken a lot of courage to shut down completely even though the management had deliberated  keeping at least a few  stores running. It is especially brave when you look at the sunk costs. Costs that they will never be able to recover. Many organisations though inwardly dying keep afloat far too long  hoping for future recovery  and in so doing piling up costs further. Future costs of doing business in a hypothetical scenario where they may or may not succeed!  Rapid multi dimensional changes  in external environment of any business sometimes far exceeds  human capability of risk management.

What if prospective or future costs  do not resuscitate  despite a change in business plan/model? After all any renovated / improved or radically changed business plan is just a life support that may or may not bring back to life something that failed in the first instance.  A quick glance at a few years balance sheets of the Target U.S operations makes it apparent that even within its own geographic comfort zone, the company was facing stagnant revenue challenges and perhaps had expanded like many U.S companies, to uplift revenue growth through International expansion.

The expansion into Canada instead of turning out to be the solution, threw up a host of issues that perhaps were already plaguing the company. Changing demographics within the US  or perhaps changing retail space or perhaps changing styles of shopping all contributed to a stagnant profit margin.It is difficult to say if the lure of brick and mortar presence, in a  barrier free electronic world  will ever lure Target to have a physical presence once again  in Canada. What is not difficult to conclude is that unwittingly Target changed the face of retail business in Canada. “Can I help you find something”, its sales force mantra to break  the initial ice with guests entering its premises set a new high in customer service.

As  a regular shopper,  I must acknowledge, icy cold stares, under the breath muttering, “I do not look after this section of the store”, and even a nonchalant pointing of the finger  in mid air aimed as a reply to, where I could find something was  the near universal  norm of a retail staffer  especially in big box stores. All this is changing.   

What is also changing is the alacrity with which customers are becoming the focus  of operations. The retail market has awoken to the fear of a  sure and steady change in the retail world. The fear of closure encompasses even the big and the mighty. “If Target could, so can we. Nothing is too big to fall.”

Is the Target story just the tip of the retail iceberg? Is the near future going to catch Organisations and Governments napping? After all  the retail sector is a huge provider of employment.

As the retail industry braces to envelope multiple distribution channels and rethink  traditional models what about infrastructure for electronic retail?  Will it be well within the reach of smaller retailers to gain access to capital and to take on high costs of technology upgrades in an electronic market place obsessing about security and personal data protection?  And in so doing, will they continue to remain competitive? This when big box retail has decided to overhaul its business model and along with big box retail outlets  embrace urban sprawls through  a new line of small stores.

 If the Internet and electronic revolution grip the retail industry, changing its face to a human free geographic space what are the implications for employment loss?

Clearly, Canada’s backbone, the  small business sector ,  needs to gear up to a challenge of a different kind. This new business model  must be seen in light of the fact that of all industries the retail sector is the largest representative of small businesses with nearly 150,000 businesses employing about 800,000 individuals. It must also be seen in  conjunction with  an Industry Canada report  titled, “Canada’s changing retail market”. The report says, commercial space  for retail is getting limited as Canadian municipalities allocate space in favour of industrial and office space thus reducing  the number of large shopping centres being built.The message? The proverbial product life cycle in retail also extends to every business model…it too has an end of life tag attached to it!.