The Business Cost Of Credit Card Data Breaches
Some recent data that has come out related to Target’s 4th quarter of 2013 data breach is a sobering reminder of just how badly this sort of thing can affect both a businesses reputation, and it’s bottom line.
Target reports that earnings crashed by 46% in the fourth quarter of 2013, as breach was ongoing, and cut into the retailers net income and sales during peak of the holiday shopping season. Considering that this is the time of year when most retailers make their profits, this is pretty earthshaking.
On Wednesday, 02/26/2014, Target reported that it’s earnings were slashed to $520 million, down from $961 million from the same period last year.
The attack, which drove many shoppers away from Target stores during period, and put much of it’s sales on a cash basis, because many shoppers that showed-up, only paid for purchases with cash. In the final quarter of fiscal 2013, the reported number of transactions at the companyâs U.S. stores slipped but 5.5%, and domestic same-store sales were down 2.5%, and there was a narrowing of the companies gross sales margin.
Additionally, Target was hit with over $61 million in expenses from the breach. Even though Target indicated that an insurance payment of $44 million covered part of this, the company has been unable to come up with an estimate for future costs related to the attack. It is likely that Targets liability insurance will also go up because of this.
To hit home as to just how many people were affected by this, several of my neighbors cards were compromised. One had her entire bank account associated with her Debit Card cleaned out. Many other neighbors have indicate that they are still avoiding the retailer altogether.
In order to draw customers back to their stores, Target has had to resort to drastically reducing prices in order to gain back market share, further dipping into their 2014 first quarter profits.
While there is no 100 percent guarantee that your system will never be compromised, there are a lot of proactive things that you can do to dramatically reduce the chances of this happening, If you would like assistance with a security review, please contact the CCS Retail Systems Systems Support Department.
– John