A market may seem like an obvious choice on paper, yet still be the wrong next step. The case of Target Canada is a classic example of this: geographical proximity, a well-known brand and supposedly high demand all seemed to point towards a rapid entry. However, the actual outcome showed that attractive signals do not necessarily constitute a sound basis for entry.
Company:
Target Canada
Topic:
Market entry and misleading expansion signals
Key takeaway:
A market may appear obvious yet still be misjudged if access, pricing logic and operational realities have not been thoroughly assessed.
Target expanded into Canada on a large scale, only to withdraw as early as 2015, having incurred losses running into the billions. Reuters reported on stock and supply difficulties, faulty barcodes, massive logistical problems, and poor product availability despite full backrooms. The analysis by Wharton and HBR also makes it clear that many customers essentially expected the familiar US Target – but ended up with a significantly weaker version in terms of price, product range and customer experience.
Canada was a logical choice; the brand was well-known, many customers were already familiar with Target from the US, and from a management perspective, there were many arguments in favour of a rapid roll-out. This is precisely where the case is relevant: the visible indicators seemed attractive enough to justify the scale and pace of the expansion. In hindsight, however, it became clear that proximity, brand awareness and consumer interest are not the same thing as a properly functioning market logic.
The basic assumption was, in essence:
If the market behaves similarly and the brand is well-known, then the model can be quickly replicated.
Wharton explains, however, that Target misjudged the competition, pricing dynamics and market readiness. Canada was not simply ‘the US plus a border crossing’. At the same time, Target disappointed precisely those customers who were familiar with the US promise and now expected similar prices, similar product availability and a similar shopping experience. Wharton also points to the comparison with J.Crew, which started small, learnt and only then expanded.
For Aiquiro, this case is highly interesting because it clearly illustrates the difference between market attractiveness and market access. In a comparable situation, we would not only ask whether a market is fundamentally interesting, but also, amongst other things:
1. Is the value proposition truly transferable to the target market?
2. Which local cost, pricing and expectation dynamics alter the model?
3. Which operational hurdles are underestimated when entering the market?
4. Does a rapid rollout make sense – or would a smaller, learning-based entry be more resilient?
This is particularly crucial for SMEs. After all, a new market often fails not due to a lack of demand in the abstract sense, but because of incorrect assumptions regarding implementation, differentiation and connectivity.
The Target Canada case shows:
A market may appear ‘logical’ yet still be strategically misguided. Anyone who bases a decision to enter a market solely on size, proximity, brand awareness or initial positive signals is quick to underestimate the real question: Under what conditions is this market truly viable?
It is therefore worth carrying out a preliminary assessment of the entry logic before hope turns into a costly misjudgement.