Target Canada using inventory shortage to drive demand

US retailing giant Target came to Canada with much fanfare over the summer of 2013. Canadian customers have long flocked to Target’s US stores to stock up on chic offerings at reasonable prices. Stores are clean, bright & well-stocked.

Target Canada has faced consumer backlash over high prices and widespread inventory problems. The prices and inventory are part of a closely controlled strategic shift, says Target Canada CEO Tony Fisher.

“We’re taking a page from Apple and Nintendo’s playbook. These companies are giants in their industries. Their marketing prowess is legendary. How did they achieve this status? Simple: they withheld inventory,” Mr. Fisher explains.

“The plan is economics at its purest: reduced supply results in higher demand. In a scenario of reduced supply, consumers are willing to pay more.”

Comments that reduced supply doesn’t necessarily create increase demand, especially in a competitive retail environment, are brushed aside. Fisher cites Nintendo’s classic launch of the Wii: Nintendo had dozens of warehouses full of Wiis – more than enough to meet demand. Releasing all of the Wiis at once would have satisfied consumer demand, driven retailers into “competition” with each other and reduced the free marketing buzz associated with the elusive product.

“We see no difference between the iPhone, the Wii, blue jeans, paper towel, or milk. Take the USSR, for example – in 1985, finding a store with milk or blue jeans in stock was exceptionally rare. Consumers were willing to pay almost any price to acquire these commodities.”

The move is not simply profit-motivated, Target is looking to garner the same excitement that was typical during the first year the Wii was on the market. Stories abound of customers driving from store to store based solely on faint rumours that a store might have a couple Wiis in-stock. Target expects to pick up significant social media buzz when consumers happen to find a product they’re looking for at Target.

“That’s the dream. To get consumers excited & talking about finding a Target location with milk or bread in stock – wow! We couldn’t ask for more. It’s the best kind of marketing: personal referral.”

SaskaDude

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