4 things Caribbean tech businesses can learn from Target’s decision to leave Canada

Four takeaways Caribbean ICT/tech businesses can learn from Target’s recent decision to close all of its stores in Canada

Last week, United States (US) retail giant, Target, announced that it will be closing its entire operation in Canada: this decision has come less than two years after its entry into that market. While for the general populace, especially those outside Canada, the decision might have been a surprise, to those in the know, it appeared to be inevitable. Nevertheless, people are still coming to grips with what went wrong, along with the fallout that will inevitably occur.

Without a doubt, there is very little similarity between Target, a well-known, well-resourced and highly profitable company, and a small ICT/tech business or start-up in the Caribbean. However, there are lessons that can be learned from that firm’s failure in Canada. Four are outlined below.

Takeaway 1: Know your customer

Though a US company, Target is a globally recognised brand that has enjoyed tremendous success at home. Brand recognition might be strong, it – in and of itself – does not in any way guarantee success. Pundits have stated that one of the contributors to Target ‘s demise in Canada is the fact that it did not understand the Canadian consumer and spending habits, which reportedly differ considerably from their American counterparts (Source: Global News).

For Caribbean ICT/tech firms that are expanding into new markets or diversifying their product range, or even the start-up trying to launch their first product, it is imperative to know the customer in the market you intend to serve. In many instances, businesses do not spend the time to clearly identify their optimal customer. Hence they do not know the extent to which that customer exists in the market, and to what degree s/he would be responsive to their offerings.

Takeaway 2: Know your business model

If you are in an enviable position as to currently have a successful business, do you know what are the critical factors – the “must haves” – for that success? Though much is made about having a business plan, and it is important, it is also crucial to know and understand the factors that have been driving, or will drive, your business’ success.

In the case of Target, and perhaps in order to scale the business as quickly as it did, it took over properties previously occupied by a low-end retailer in Canada, Zellers, which many believe, were unsuited for Target in terms of location and aesthetic, to name a few (Source: Slate). Hence being well situated to attract the desired the clientele and being able to offer the “Target experience” it might have been compromised, and would have contributed to its demise.

Takeaway 3: Double check and manage your numbers

Though Caribbean ICT/tech businesses generally tend to be risk-averse, it can still be easy to get caught up in the potential of an opportunity and not truly pay attention to data until it is too late. However, more importantly, systems must be implemented to collect the data needed to make a meaningful initial business case, and to facilitate tracking and analysis during operation.

Another reported contributor to Target’s failure in Canada is the fact that it did not appreciate that doing business in Canada was more expensive that in the US (Source: Global News). Although Canada is larger geographically than the lower 48 states (of US), the latter is considerably more populous. Hence matters such as transportation and staffing costs in Canada, along with the cost of doing business generally and a weaker currency in comparison to the US, would have affected the extent to which Target would have been successful in Canada, and more so if no major steps were being implemented to manage them.

Takeaway 4: Speed to market tends to come at a price

Target’s entire operation in Canada was about two years old, but in that time, it opened 124 of the 133 stores it currently has in its first year, 2013 (Source: Slate). Many are of the view that this expansion was too fast too soon, with no provision made to learn and accommodate the inevitable teething pains that virtually all businesses experience. One of the outcomes of that situation were poorly stocked shelves in Target stores across Canada, which suggests that critical systems, such as those related to supply and distribution, were not as developed and as responsive as they needed to be for the circumstances at hand.

From the smaller business/start-up perspective, and especially in the tech/ICT sphere, there can be a rush to get to market – to beat the competition, and to get the product or service in the hands of customers to start earning revenue. However, is your offering ready for the market? Have adequate provisions been made on the operations side of the business, beyond the product or business launch? Whilst it is true that businesses can get caught up in trying to launch with the “perfect finished product”, and incur prohibitively high developmental costs which might be challenging to cover, the reverse might be no better. It is thus critical to determine the trade-off that one is prepared to make in relation to, for example, speed to market, readiness of the product, and readiness of the business as a whole.

 

Image credit;  Marius Watz (flickr)

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1 Comment

  • Having been closely associated with a retail establishment that attempted to go into a new market and failed painfully, the points strike a code.

    In retail especially, Takeaway # 4 is where everything stems from, in many cases. “Kicking the tyres” first is often a life-saver in these circumstances. What’s on the drawing board often is far different from what happens at point of execution.

    For instance, I was part of a team that went to take a look at how UK’s retail “big boys” ( Argos, Tesco, Asda etc ) make preps for Christmas. Came back with “very good ideas”. Implementing them, they went up in smoke. A simple but key mis-step: Christmas in the northern hemisphere occurs in winter, in the southern hemisphere it’s in summer! While we were remotely mindful of this fact, the actual reality on the ground was quite astounding.

    Fortunately enough we went into it piecemeal.

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