Today giant Wal-Mart competitor Target is expected to
release their first quarter results – and they aren’t expected to be all that
great.
The American retail chain’s sales are down across the board,
and they are even worse since they opened about 100 stores across Canada.
Their new Canadian customers have been complaining that
their prices are substantially higher in Canada, and they lack the selection that
you’d find in their American stores.
Yesterday, they fired their Canadian CEO, replacing him with
an American, because their Canadian operations have posted a loss of $941
million in their first year, resulting in a drop of $1.13 per share.
This isn’t about Canadian versus American leadership, which
appears to be how Target is handling it.
What it boils down to is a simple life lesson any
entrepreneur needs to learn, if they are to run a successful business: listen
to your customers.
Always listen to your customers.
If your customers are complaining about high prices and lack
of selection – as is the case with Target’s Canadian customers – do something
about it.
Although rotating the leadership deck will appease stock
holders in the short-run, because it appears to them that action is being taken
to resolve the problem, that’s more of a perceptive change than a practical
one.
Perception is everything in business. Tell any shareholder
their stock just tanked, and the first thing they want to do is find out who’s
to blame, and have that person sacked.
That’s the perceptive change which Target has enacted – they
fired their Canadian CEO, and appointed a bunch of American executives to the
Canadian team to make it look like this new team can turn things around.
But that’s not the practical action, because it fails to
address the real problem.
What’s the real problem?
Just ask Target’s customers.
They are the one’s NOT going into the stores and NOT
spending money.
Target’s customers have complained loud and clear that they
don’t like the higher prices and lack of selection when compared to the
American stores of the same name.
So the practical solution is to lower prices and increase
selection in the Canadian stores, to be more similar to the Target stores which
Canadians have visited in the States.
That doesn’t take a leadership change, anyone can do that.
It just takes common sense – listen to your customers. Give them what they
want. Make them happy.
Within Reason of course – if your customers are telling you
to jump off a cliff, don’t listen to them.
However, when your customers are complaining about something
that is realistic, and even makes sense – do it.
Like when your customers complain that your American stores
have better prices and selection than your Canadian ones.
That’s an easy fix.
Will Target’s new leaders make it?
Or will they try to cover it up with slick advertisements
that don’t solve the problem?
One of the biggest mistakes big companies make is not admitting
their mistakes.
Another American retailer, JCPenney changed that. In 2012,
their new executive decided to eliminate all sales, and make all prices even,
instead of end with their traditional 99 cents.
Customers complained they missed the sales, and thought
prices went up, because they were no longer just under the next dollar.
JCPenney listened to their customers. They admitted their
mistake, fired the CEO that made those changes, and brought back their sales
and their traditional pricing model, ending in 99 cents.
It wasn’t rocket science – it never really is. You don’t
need some young MBA graduate to spend months creating reports to tell you what
the problem is. You just have to listen to and act on your customers concerns.
Target can learn a lot from JCPenney.
