Early signs suggest that big problems loom ahead for the retailer, but there may be a silver lining when all is said and done.
Avivah Litan, vice president and distinguished analyst for Gartner Research, an information technology research and advisory firm, writes in her blog that Target has spent a lot of money on credit security, but became a “victim” of the biggest retailer security breach since 2005.
As a result, Target has become a target and is likely to be made an example of by the payment card industry, which probably will fine the store, raise its merchant fees to Visa, Mastercard, American Express, etc., and require it to pay back card-issuers for any fraud caused by the breach.
What that means to the consumer is that the cost may be passed along to them. Shoppers have often experienced retailers—especially small independents—that don’t accept American Express cards because the merchant fee is so much higher than Mastercard and Visa that owners contend they cannot mark up product enough to cover the added cost without losing customers.
Three class-action lawsuits, two in California and one in Oregon, already have been filed against Target seeking damages for the security breach.
“In the end the actual fraud loss, which Target will have to pay for, is likely to be less than $25 million,” Litan wrote. “But the fees it pays the banks may be twice that amount. If they get much higher, Target may have to pass on these costs to consumers in the form of higher prices.”
And yet, despite the bad news, despite losing about 4 percent in sales over the weekend from the previous week and compared to the same period a year ago, all is not lost.
Target stock remains largely unchanged, about $62 a share, and many shoppers are simply switching to cash to avoid the risk of credit card fraud.
Litan told The Associated Press she doubted Target’s sales would take a big hit, especially after the retailer launched a big promotions campaign following news of the security breach.
“People care more about discounts than security,” Litan said.
If all else fails, there’s always Walmart.
Jackie Jones, a journalist and journalism educator, is director of the career transformation firm Jones Coaching LLC and author of “Taking Care of the Business of You: 7 Days to Getting Your Career on Track.”