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March 3, 2024

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Target’s closings because of crime protect its profit, but at expense of communities and customers

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Target painted New York City red and white in 2010 when it opened its East Harlem location, its first permanent store in Manhattan, after years of courting and anticipation from locals.

Target mascot Bullseye rang the New York Stock Exchange opening bell, and the retailer’s ads splashed across Times Square, double-decker buses and subways.

But now the Harlem Target, in a shopping complex along the Harlem River, is one of nine in Seattle, Portland and the San Francisco Bay Area that the Minneapolis-based retailer will close Oct. 21. Target announced the swath of closures last week with a stark news release, citing theft and safety as the reason. Target declined to provide further comment outside of the original release.

Closing stores is an extreme measure to combat crime and safety concerns, and while Target’s move was one of the strongest recent examples of that, it isn’t alone. In San Francisco, several stores have closed, including Nordstrom and a new Whole Foods.

Retailers cutting their losses in big cities already facing post-pandemic challenges is yet another hurdle for major downtowns hoping to re-establish their vitality.

“At the end of the day, I think those were struggling locations, and I think the theft and security was a real issue, but it was really a combination of factors,” said Tom Gillpatrick, a business professor at Portland State University and founder of the school’s Center for Retail Leadership. “It’s a changing of the urban environment.”

A communal loss

While Target still will have stores in all of the markets where the nine are closing, any time a store providing locals with essentials like food and cleaning supplies closes, it can leave a gap in the community.

“All East Harlemites deserve to live near convenient, affordable, healthy grocery stores,” New York Assembly Member Eddie Gibbs, whose district includes East Harlem, said in a statement. “Target served as an economic anchor for this community, employing over 200 people and providing invaluable and affordable food choices. With [last week’s] announcement, East Harlem residents must leave their neighborhoods and spend money outside their communities to feed their families.”

Myra Shallan, 34, has lived in Harlem for almost four years and said Target had been a staple in the neighborhood. But the impending closure has proved to her the company wasn’t a true community partner. She added she thinks the store closing has less to do with theft and more to do with Target wanting to prioritize more affluent areas.

“It just feels to me on an intuitive level that [the closure] is pretty targeted against the people who shop there and whether they are people of color,” Shallan said.

Target’s 2010 Harlem opening had pushed some smaller grocers and local stores out, and now that Target is leaving, there aren’t as many options for shoppers, she said.

One of the closing stores in Seattle is a quick walk from the University of Washington, and students without cars will likely find it more inconvenient to shop for dorm essentials after the shuttering. The campus community also recently lost a nearby CVS, said Jeff Shulman, a business professor at the school.

“There was a time when students had a surplus of opportunities to get a last-minute toothbrush or deodorant,” Shulman said. “Now Target is one of several to leave.”

In urban store setups, which have fewer products and smaller footprints, theft can be catastrophic for already thin profit margins, Gillpatrick said. Target is already suffering from a companywide consumer slump that has sent sales down for the first time in years.

A common issue

Before Target’s closures, Nordstrom shuttered both its stores in downtown San Francisco this summer because of what it called the city’s changing dynamics. Whole Foods also closed its downtown store this year because of worker safety, while San Francisco-based Old Navy shuttered its flagship store on Market Street as well.

Walmart closed its two Portland stores and four of its eight Chicago stores earlier this year, explaining the Chicago ones had not been profitable since the company opened the first one nearly 17 years ago. Outdoor retailer REI also said it will close its Portland store after numerous break-ins.

From 2010 to the start of the pandemic, people rushed to move into cities. In Seattle, there was a large push for residents who wanted walkability and also companies that wanted to capitalize off them, said Shulman, who created the “Seattle Growth Podcast.”

Then everything changed with the pandemic. Most downtown offices shut down as people worked from home. Businesses closed and events ceased.

As corporations ask workers to come back to the office, it might shock those returning to see fewer services and stores in the city than before, Shulman said. And that could make city life even less appealing and perpetuate a cycle of disinvestment, he continued.

“When Target leaves these urban centers … they become less desirable, and so there’s not the same foot traffic,” he said.

Minneapolis isn’t immune to that negative cycle of urban retail decline. In already struggling Uptown, Target closed its small-format store this spring because of underperformance. On dwindling Nicollet Mall in downtown, Target’s flagship store started to lock up some products, added more security and reduced its hours because of what Target called “a rise in disruptive activity.”

A complicated solution

Just a few years ago, retailers would not publicly disclose their strategies to stop crime. Today, stores are more upfront about their practices, especially as mounting losses on their balance sheets demand explanation.

“The last thing a retailer wants to do is close their doors,” said Khris Hamlin, vice president of asset protection for the Retail Industry Leaders Association. “… But these retailers, they are getting to a place where their back is against the wall.”

In San Francisco reports of shoplifting have increased about 20% from 2019 to 2022, according to the California Department of Justice. Target leaders have said they expected inventory shrink — the industry term for product losses, which mostly encompasses theft — to reduce the company’s profitability by more than $500 million this year compared with last year.

In its announcement about the store closures, Target said it has added more security guards, used more theft-deterrent tools like locked cases and made “significant investments” in cyber defense.

But research analyst Scott Mushkin, leader of R5 Capital, said he’s not convinced those are solutions.

“All the things the companies are doing to prevent stealing,” he said, “it’s actually degrading the retail experience.”

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