retail therapy

Target Becomes a Target as Political and Masstige Strategies Flop

Posted by Abe Sauer on June 8, 2011 12:00 PM

June will be a big month for retailer Target, and today, one of the brand's bigger June days. It's the retailer's annual shareholders meeting and also the day after a pension fund trustee representing 1 million shares of Target stock wrote an open letter to New York City's comptroller asking him to "consider withholding votes from relevant Target Corp. directors, in the absence of a change in policy on political spending."

Elsewhere in New York, Target has become the national focus of the next chapter between corporations and organized labor. It's a union battle that Target loses, even if it wins.

New York City Employees Retirement System Board Member Bill de Blasio, wrote: "I write to express deep concern regarding the City's investment in Target Corp. The company's experience in political spending, and the lack of effective reforms taken by the company after the controversy ...make the company a leading candidate to receive a shareholder resolution regard [sic] political spending… I ask that you consider withholding votes from relevant Target Corp. directors, in the absence of a change in policy on political spending."

Target's political giving woes began last year when the brand donated $150,000 to a political action organization that supported far right-wing candidiates, includes those who were vehemently anti-gay rights. After Target CEO Gregg Steinhafel apologized for the donations and promised reform, it was revealed that the brand kept donating through the 2010 election cycle. When Target finally announced political giving policy changes, questions remains about whether or not any substantive change had been made at all.

Meanwhile, later in June, just over 250 employees at the Valley Stream Target will vote to unionize. If the effort passes, it will be the stepping stone toward unionizing approximately 5,000 New York City Target "team members." A victory by unions at Target in New York will certainly not reverse the erosions of union strength in America. Even if it fails (as other Target unionizations have), the press coverage of the effort will drag out information about how Target's labor practices are maybe not as exemplary as its image has enjoyed.

For example, New York-based blog Gawker, whose audience is Target's demo, has been running a brutal series of interviews with team members to expose life inside "Brand Target." One report provided a list of complaints of employee abuse. A New York Times report on the effort noted that one employee, even with a Target job, is on food stamps and contained the statement, "Union officials assert that Target’s wages and benefits are only slightly better than Wal-Mart’s."

Recently, Gawker (which has also been targeting Wal-Mart) published an anti-union letter it says Target circulated to threaten team members.

Wherever one falls on the argument about unions, there is no debate that this is painful for the retailer's brand, especially in New York. The city strongly opposes Wal-Mart's expansion there, while allowing for a Target in Brooklyn in part because the retailer was seen as a more socially responsible brand. The constant reinforcement in reports that Target is really no better than Wal-Mart is press the retailer does not need right now.

Target shares are trading at 52-week lows, inspiring Wall Street Journal leads such as today's: "A series of recent stumbles at Target Corp. has some retail experts questioning whether the cheap-chic discounter is losing its cachet." It's the kind of additional bad press that can become a self-fulfilling prophecy.

In Pittsburgh, where the brand's annual meeting is taking place, political giving is not on the agenda today and all statements from the brand echo previous statements about evaluating "our giving based on business, team member and stakeholder objectives."

At the end of the day, it might just be that Target CEO Gregg Steinhafel doesn't understand the brand. Evidence of just how PR-challenged the CEO is comes in the form of a March 31, 2011 private donation from himself to right-wing Minnesota candidate Rep. Erik Paulsen, Steinhafel's first campaign contribution since last summer's scandal. Not only was Paulsen one of the anti-gay rights candidates Target and Steinhafel were criticized last summer for supporting, but also, as a state legislator, he was one of the supporters of an original constitutional gay marriage ban that has again reared its head in Minnesota and opened old woulds about Target's anti-gay political support.

Steinhafel's total donation was just $2,400, a drop in the bucket for both Paulsen and the CEO, so, with this private donation publicly reported to those scrutinizing the brand, why make it at all?

As for that Wall Street Journal piece today (titled, "More Target Than Tar-zhay?" in a swipe at its previous 'masstige' success), the evidence is mounting that the once-hip brand has lost its way:

The chain that made it trendy to shop for low-priced designer clothing and mod lamps while picking up detergent and toothpaste has been struggling to gain back its pre-recession sales strength. Target shoppers are stocking up on toilet paper and foodstuffs, but the stores are having a hard time enticing customers to spend money on stylish clothing and home goods—which are more profitable and make up more than 40% of annual sales. It was these apparel and decorating items—mixing mass with class—that set Target apart and allowed it to be one of the few discount chains to thrive against Wal-Mart Stores Inc.'s relentlessly low prices.

Adrianne Shapira, retail analyst at Goldman Sachs, said Target has confused its shoppers by emphasizing food and low prices at the expense of its cool image. In 2009, in the depths of the recession, Target began adding fresh and expanded refrigerated foods to most of its 1,750 stores. To boost loyalty, last year it began rolling out a 5% across-the-board discount for customers using its Target-branded credit and debit cards. Some of Target's struggles may also owe to the changing competitive landscape. Kohl's Corp. and J.C. Penney Co. in recent years have taken a page from the Target playbook, adding low-price designer clothes from Vera Wang, Ralph Lauren and others. "Remember, when Target had the most success in apparel, the department stores were still figuring things out and were in disarray," said Brian Sozzi, retail analyst at Wall Street Strategies.

Sounds like it should be a lively meeting in Pittsburgh today.

Comments

oldboldgold United States says:

Used to like Tar-zhay, but no more.  I worked at ARCO Oil & Gas Company when we got a new President, Glenn Simpson (now dead, RIP).  He destroyed company morale in less than a year.  Toxic policies and ideas.  Taken over by BP in 2000.  Stupid executives destroy corporations very quickly.  So, who will they pay YAHOO to blame?  Evil American consumers?

June 10, 2011 12:09 AM #

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