Tag Archives: Target

A horror-filled business case…

The PolyBlog
August 25 2016

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 that 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 of 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 oftentimes 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.

Articles I Like: The Threat of Free Riders

The PolyBlog
April 23 2012

The Harvard Business Review has a great website, combining not only the articles from their magazine, but daily summaries of key articles, interesting statistics and a number of cool blogs ranging from “soft” HR issues to “hard” business articles. Frances Frei and Anne Morriss wrote a blog entry called, “Target and the Threat of Free Riders” that is pretty good. I know what you’re thinking — umm, doesn’t the heading for this blog entry say it’s about “publishing”? Yes, yes, it does. Because while Frei and Morriss are primarily talking about Target, the hidden subtext behind it is Amazon.

You might remember the big kerfuffle at Christmas time…Amazon released a new App that could scan bar codes, and they encouraged you while shopping in bricks and mortar stores to do some price comparisons. And then, *gasp*, buy from Amazon if the price was cheaper. They even had the audacity to offer initial discount coupons to those using the apps. The blogs exploded with stories of how Amazon was evil, how dare they do this, it was destroying the local infrastructure. They were essentially complaining that Amazon was being a “free rider” — the store chains have physical locations with large overhead costs they have to pay, and here Amazon was saying “go visit them, touch and feel your items in person, exploit their overhead, and then buy from us.” See what Frei and Morriss have lots to say about it from the perspective of Target, and guess what? They argue that OTHERS should be free-riding on Amazon’s investments:

Target is getting nervous, for the first time in a while. Some Target shoppers are browsing comfortably in the company’s high-design stores, then closing the deal online with lower-priced vendors. It’s enough of a phenomenon that CEO Gregg Steinhafel recently penned a letter to his suppliers with a competitive battle cry: “we aren’t willing…to let online-only retailers use our brick-and-mortar stores as a showroom.”

…

When there’s high utility of information pre-purchase and ease of substitution among products — as there is with big box retail — you run the risk that your well-educated customers will give their money to a competitor, sometimes without even leaving your store (not every customer huddled over a smartphone is playing Angry Birds). Customers won’t stick around out of gratitude.

Steinhafel’s letter hints at some of the ways that Target’s planning to fight back, including membership and subscription-based pricing models. The company might also look to one of its biggest free-riding threats — Amazon — for inspiration. Amazon should be facing an onslaught of customer free riding. Its products are often not the lowest-priced option, and they’re easy to substitute.

But the Amazon pre-purchase experience — a robust catalogue of customer and expert reviews for each product — gives you a reason to start the process there. Most important, Amazon then makes the pivot to purchase as seamless and lovely as possible, even from a cell phone. The retailer’s patented one-click technology makes it irresistibly easy, once you’ve found what you’re looking for, to point and click and be done with it. Amazon combats free-riding with ease of use.

Target and the Threat of Free Riders | HBR

My only quibble with the article is that it didn’t really pick up on the emotional backlash against free-riding that was generated with the Amazon app. People blogged, campaigned, boycotted, etc. Lots of people got really snippy, having no real idea what free-riding means but they could understand Amazon trying to steal sales from live stores.

Yet nowhere in all of the feeds did I see anyone, not even the timidest or bravest of souls, stick up their hand and say, “Umm, excuse me. How is this different from a store that price-matches?”. Because that too is complete free-ridership. So you go to the box store, find out everything you want to know, get whatever form of customer service you can get, get a quote on a price, and then go to another store that you would prefer to deal with, and ask them to match. Your drycleaners will do it. Your box stores like Zellers, Walmart, Sears, The Bay, Target, etc all have price-matching and “low price guarantees”. Mattress stores do it CONSTANTLY — they’ll price match anyone. Car sales. Pharmacies. Bookstores (gasp!).

In other words, another store goes to the trouble of deciding to have a sale, researching costs, deciding on a sale price, organizing their store with discount tags, new pricing, letting all their staff know about the promotion, etc. Then they advertise, generating big costs to do so. And their neighbour simply puts out a sign that says “bring us their ad, and we’ll match it.”

That’s basically what Amazon did, except they did it with an app and made it possible to not only price match a sale, but also to simply scan a barcode to see what the price is at Amazon (usually not as good for many items, as the article makes out). But the anti-Amazoners went berzerk anyway.

Never let the facts of a situation get in the way of a good rant against a big evil company like Amazon. After all, you wouldn’t want to take away sales from a local “good corporate citizen” like Walmart, now would you?