Target sees drop in customer visits after breach

Tim Boldt lives across the street from a Target store in Romeoville, Ill., 45 minutes outside Chicago. He had been a faithful shopper there for 10 years, stopping in at least twice a week for groceries and snacks, gifts during the holidays and school supplies in the fall.

Now, like a lot of customers who heard in December that 40 million of Target's customer accounts had been hacked, he has pulled back.

In mid-January, his bank notified him that he was one of the victims. Someone had racked up $450 in charges on a debit card Boldt had used to buy gifts at Target during the holiday season.

Since then, he has been back to Target only a handful of times and always pays cash, which limits how much he can buy.

It's a trade-off some Americans are making as one of the country's most-shopped retailers works to rebuild its image and regain customers' trust after suffering one of the largest data breaches in retail history. On top of the 40 million accounts, as many as 70 million more customer records of personal information were stolen.

Target's customer traffic in January, online and in stores, hit its lowest point in three years: 33% of U.S. households shopped at Target in January, compared with 43% in January 2013, according to consulting group Kantar Retail.

The sharpest declines came from one of Target's core customer groups – Gen X – as well as fringe shoppers who don't shop as often. Visits by lower-income customers who shop less frequently declined 30%. Gen X shoppers – ages 32-49 – declined to 38% from 53% last year, Kantar's data show.

While some drop in traffic after the frenzied holiday season is expected across the retail industry, Target's decline was particularly sharp, says Mary Brett Whitfield, senior vice president for shopper insights at Kantar.

"Target's falloff was much more significant compared to other retailers we track," she says. Kantar Retail follows approximately 200 retailers, including Walmart, Macy's and Best Buy.

Target! declined to comment. Its fourth-quarter earnings report out last month showed the store's sales suffered in the weeks following the disclosure of the breach. Net income fell 46% to $520 million from $961 million in 2012 and sales were down 5.3%.

In a company statement, Target president and CEO Gregg Steinhafel said then that the company's "results softened meaningfully following our December announcement of a data breach," and that the retailer "will continue to work tirelessly to win back the confidence of our guests."

Some people who have stopped shopping at Target vow they won't go back. Kim Woods of Oklahoma City, whose debit card information was compromised in the breach, hasn't been back or shopped on Target's website since a trip on Dec. 9, when Target was still unaware of the breach. She's still "angry with them for not protecting my data," she says.

Others, like Boldt, have gone back reluctantly, unable to ignore the convenience of Target's 1,683 stores. Germaine Fields, 46, says he'll probably never again use a debit or credit card at Target but isn't less likely to shop there.

Boldt says Target's promise of free credit monitoring and identity theft protection for all customers isn't enough to make him a regular again. He wants specific answers to his questions about how Target plans to prevent a similar incident from happening again.

"I don't feel safe, and I don't have a comfort level that my security or my identity is secure with Target," he says.

While some customers say they're ditching Target, the data breach isn't likely to significantly affect the retailer's customer base in the long term, says Brian Yarbrough, a research analyst with Edward Jones.

"Probably 5% to 10% of customers will never shop there again," he says. "It's just the nature of the beast. But in this day and age, customers have slowly become immune to the breach."

Still, Yarbrough says, losing any customers isn't ideal, even if they were already less-frequent shoppers.

Custo! mers can turn to competitors like Amazon and Walmart to replace some products, but Target retains its value for shoppers in categories like home and apparel, where it promotes designer collaborations and inexpensive trends, Yarbrough says. He predicts that shoppers' emotional reaction to the hacking will subside in a few months.

"Some people's trust has been shaken," Yarbrough says. "But most people have come to like the brand, like the products they sell. Honestly, heading into summertime people won't even be talking about this anymore."