The Target data breach is moving the industry to be more secure, and consumers to be more cautious.
The silver lining in Target’s sad story is the industry’s new impetus to shore up data security. The Retail Industry Leaders Association - whose members include Target, Walmart and Publix, and run more than 100,000 stores, DCs and manufacturing sites – struck two partnerships in quick succession. The first is with the Financial Services Roundtable (banks and payment networks); the second is with the National Cyber-Forensics and Training Alliance (to share information and guard against cyber threats).
Such unified action is long overdue, in our view at The Lempert Report. It comes too late to save millions of consumers the enormous hassles emanating from exposure of their private data – though it could help ensure a safer, more secure future for retailers, customers and suppliers.
The scale of the Target breach was unprecedented – the personal data of more than 110 million consumers apparently started with a malware-laced email phishing attack sent to employees at Fazio Mechanical, an HVAC contractor that worked for Target, reported KrebsOnSecurity. No doubt Target suffered: its CIO resigned; and its fourth-quarter profit fell 46% on a 5.3% sales drop and a 5.5% decline in the number of transactions, as mistrusting shoppers and potential shoppers stayed away.
Yet they’re not the only retailer victimized. Data breaches have occurred in recent years at Neiman Marcus, 7-Eleven, Hannaford Brothers, BJ’s Wholesale Club and others, according to separate reports by Bloomberg and Reuters.
Retailers that haven’t been compromised yet may feel they could be the next headline any day – which helps explain the new rush to improve cyber-security.
Dodge a bullet – take a precaution.
Yet The Lempert Report wonders if whatever retailers and trading partners do now to restore shopper confidence would be enough – or if payment systems seem too vulnerable to determined crooks.
Perhaps consumers will pay cash more often, or choose payment systems such as PayPal that provide another layer between them and data thieves. After all, people want to carry less debt too – it’s a burden in a slow economy. Only time will tell if enough people will feel this way to ultimately affect the leverage that MasterCard, Visa and other financial services companies have on interchange fees.
New Kantar Retail ShopperScape data suggests where this stands now: 9% of all shoppers and 13% of monthly Target/SuperTarget shoppers say they will “still shop at Target, but only pay with cash.” Also, 11% of all shoppers and 12% of monthly Target/SuperTarget shoppers are “more likely to pay with cash going forward wherever I shop.”