MONEY

Why Nobody Calls Target ‘Tarjhay’ Anymore

140820_EM_OneStopShop_2
Getty

After another disappointing earnings report this week for Target, it's time to take stock of what has happened to the cheap-chic retail industry darling that everybody used to call "Tarjhay."

Target cut its profit outlook on Wednesday, while reporting poor earnings and continued sluggish sales in the latest quarter. While the news was more or less expected—Target recently hired a new CEO to address its well-known struggles in the marketplace—things look as grim as ever for the all-purpose retailer that few shoppers refer to as the fancier-sounding “Tarjhay” anymore.

“Target has given investors ZERO reason to be encouraged that a global turnaround is secretly emerging,” Brian Sozzi of Belus Capital Advisors wrote, responding to Target’s latest earnings report—and rating Target stock as a sell. “At the domestic store level, merchandising issues persist, including weak assortments in apparel (notably the hot category of athletic apparel) and the over-buying of seasonal categories in light of persistent negative traffic.”

“You have seen a brand that has lost its way,” Steve Beck, founder of the management consulting firm cg42, said of Target in early August, after it was revealed Target had lost $148 million as a result of last year’s holiday season credit card data breach, according to MarketWatch. “And the end result is poor performance.”

So how exactly did Target lose its way? Why don’t shoppers flock to Target for cheap chic fashion in the numbers they used to? Target itself deserves much of the blame, but the economy and big shifts in the retail landscape also factor in.

Part of the explanation is that one-stop shopping, which not long ago was perhaps the best sales pitch in retail, is not the draw it used to be. The concept of one-stop shopping made sense for retailers on several levels. All-purpose stores like Walmart and Target expanded grocery sections in order to offer more convenience and efficiency to harried, time-crunched consumers. Many dollar store chains followed the same playbook, pumping up selections of groceries and other household staples to give shoppers reason to pop in multiple times a week, rather than every so often when they needed cheap party favors or random craft supplies.

The idea is that shoppers will come in specifically for low prices on certain items, and perhaps—in the case of Target, especially—for exclusive designer goods that can’t be found elsewhere, and that while they’re in the store, they’d also pile up impulse buys and needed household products alike into their shopping carts. This is all possible when almost everything under the sun, from spicy mustard to designer end tables, fishing poles to kids’ winter coats, is available under one store roof.

Yet at Walmart supercenters, which represent the ultimate in one-stop shopping in America, foot traffic and sales are on the decline. Sales and customer visits have likewise been falling at Target, and even smaller, nimbler dollar stores have seen growth go flat, prompting the need for a dollar store merger that’s yet to be determined.

Many factors have affected sales recently at these outlets, notably the decrease in food stamps to America’s poor, who therefore have less money to spend at Walmart and dollar stores, as well as the monumental data breach at Target, which damaged the company’s reputation among shoppers. Stagnant wages among American workers, and general uncertainty in the economy have hurt sales too. But part of the equation is that, in the age of Amazon Prime, one-click buying, and a range of online grocery shopping services that eliminate the need to browse store aisles, the appeal of one-stop shopping has diminished substantially. If saving time is a primary concern for consumers, there are far better, far quicker ways to run errands and gather essentials than hitting a gargantuan Target or Walmart location out at the mall or by the side of the highway.

When Target was the media and shopper darling nicknamed “Tarjhay” for its chic fashions and dependable household staples, the perception was that it truly delivered on its slogan “Expect more, pay less.” Target’s big problem is that the motto has rung hollow for quite some time. “The dimension of ‘expect more’ is gone,” said Amy Koo, a senior analyst at Kantar Retail. “As for ‘pay less,” well, pay less than what? Folks are savvier today. They’ll order at Amazon. It’s easy to find products that are much cheaper online, and it’s much more convenient to a shopper’s needs.”

Similarly, Walmart’s slogan (“Save money, live better”) is less resonant with shoppers today because if they were truly living better, they wouldn’t be shopping at Walmart—at least not in the physical stores themselves. Today’s consumers expect more than ever, and they want to live better by burdening themselves as infrequently as possible with chores such as shopping for groceries and other boring basics. Essentially, they expect more than even the biggest supercenter can provide—which will inevitably pale in comparison to what shoppers can find in terms of pricing and selection online.

While Walmart has mostly competed on price to keep sales from drifting away to its online and brick-and-mortar rivals, and it’s been extremely difficult to fend off dollar stores, Amazon, and the rest, Target became a phenomenon back in the day by having a pretty good track record at picking styles and designs that suited shoppers’ tastes at the time. Then the Great Recession destroyed household disposable income streams, and even cheap chic wasn’t cheap enough. There were some big mistakes—developing an online presence very late in the game, the epic debacle that was the high-price Target-Neiman Marcus partnership, a largely unsuccessful expansion into Canada—but none has been bigger or more destructive for sales in the post-recession era than Target’s concentrated appeal to a core group of wealthier free-spending shoppers, said Kantar’s Koo.

“Target is saying: We don’t care about the low-income shopper, we’re going to focus on the people who can spend more money,” said Koo. As a result, the styles and prices at Target were “suddenly not in line with many shoppers. It’s no longer tailored to meet the mass audience.”

Lately, Target has been undergoing some soul searching. One Target location in Minnesota was turned into a test store for trying out new products and services to get the reactions of customers. A new CEO, Brian Cornell, was hired, and his first promise was to listen and learn rather than make any sudden dramatic moves. This week, the company announced some stores would stay open until midnight on a trial basis through the holiday season to woo night owls and people working odd hours.

Extending store hours will help Target make the case that it’s more convenient, and more in tune with what shoppers need today. It just appears unlikely that any of Target’s tweaks will prove to be game changers and turn things around quickly for the struggling retailer. It also appears pretty much an impossibility that the “Tarjhay” nickname will resurface anytime soon.

MONEY Tech

6 Horrible Things the Sharing Economy Is Being Accused Of

A Lyft car drives along Powell Street on June 12, 2014 in San Francisco, California.
Lyft, the ride-sharing company known for its iconic pink mustaches, is involved in what's called "Tech's Fiercest Rivalry" with competing service Uber. Justin Sullivan—Getty Images

You'd think that businesses that are part of something dubbed the "sharing economy" would play nice. Well, think again.

While sharing economy businesses such as Airbnb, Lyft, Uber, and TaskRabbit were created with the idea of connecting people and empowering individuals as entrepreneurs, they were also designed to disrupt existing business models. That process can be ugly, as it occasionally wreaks havoc not only on big industries like hotels and taxis, but also on how people make a living and where they can afford to live.

There’s an argument to be made that the sharing economy is not really about sharing at all. Rather, it’s a semi-regulated, tech-enabled, blatantly capitalistic peer-to-peer business model. Sure, it helps people earn a few bucks or get services cheaper than usual, but we must admit that the model can be brutally cut-throat in the way seemingly everything and everyone is monetized. Given such, it’s not all that surprising that sharing economy businesses are being blamed for some pretty nasty stuff lately. For example:

Sabotaging Each Other
The Wall Street Journal described the battle of ride-sharing competitors Uber and Lyft as “Tech’s Fiercest Rivalry” due to tactics such as giving cash bonuses (up to $1,000) to recruit drivers away from each other. In a particularly ugly turn, Lyft accused Uber of booking—then cancelling—more than 5,500 rides since last October, just to mess with Lyft drivers and the company in general. (Uber denied Lyft’s claims.)

Price Gouging
This summer, Uber agreed to limit surge pricing during natural disasters and emergencies, but that doesn’t mean its hated price hikes during peak demand have gone entirely away. Fans who attended a recent music festival in San Francisco were subjected to surge pricing that was five times the normal rate, meaning a short Uber ride through town cost hundreds of dollars, Valleywag reported.

Inviting Squatters and Scammers into Your Home
Following in the footsteps of an Airbnb host being disturbed by renters holding an orgy in his apartment, there’s the story of an Airbnb host being outraged by squatters who refused to leave (or pay) for their rental.

Wrecking the Housing Market
Critics say that Airbnb rentals turn homes and apartments into quasi-hotels, and landlords in desirable, touristy destinations such as San Francisco and Marfa, Texas are being accused of evicting long-term tenants so that units can be used as more lucrative short-term rentals. The sharing economy pioneer has also been linked to soaring rent and housing prices in general, and also the idea that the comfortable atmosphere in apartment buildings and entire neighborhoods is being destroyed by the presence of too many loud, unruly tourists.

Illegal Currency Trading
A group of taxi companies in India has accused Uber of violating local laws for credit card transactions. It is against the law for Indian citizens to conduct business in India using a foreign currency, and that’s what the group is saying is happening every time someone there uses Uber.

Ruining Wages, and Not Only for Taxi Drivers
Cab drivers are the ones who have been most up in arms about the way rideshare upstarts like Uber, Lyft, and Sidecar have been disrupting their livelihoods by wooing away customers. But the brutally competitive nature of these businesses and the sharing economy in general has been causing trouble for other workers as well—like Uber and Lyft drivers themselves.

Professional UberX drivers supposedly earn $90,000 per year in New York City, but that figure doesn’t factor in many business expenses, including parking, gas, insurance, or the maintenance of one’s vehicle. And as rideshare companies engaged in price wars recently, some drivers have seen their wages cut significantly.

The dark side of the sharing economy is that it commoditizes all sorts of skills, services, and workers overall, and puts downward pressure on how valuable they are. The recent changes at TaskRabbit, the peer-to-peer site where people can book (and offer to handle) outsourced chores, has resulted in something of a race to the bottom in terms of money people can earn, mostly because it has become more difficult to beat out the competition for gigs.

[UPDATE: TaskRabbit reached out to clarify that it recently adopted a minimum rate of $11.20 per hour for the tasks coordinated on its site. The company points out that the rate is much higher than any state's minimum wage.]

In a vehemently pro-sharing economy column published this summer by the New York Times’ Tom Friedman—it was was more or less an extended interview with Airbnb CEO Brian Chesky—Chesky envisioned a future in which people multitasked at several jobs rather than serving as employees of a single company. “You may have many jobs and many different kinds of income, and you will accumulate different reputations, based on peer reviews, across multiple platforms of people,” Chesky said. “You may start by delivering food, but as an aspiring chef you may start cooking your own food and delivering that and eventually you do home-cooked meals and offer a dining experience in your own home.”

This vision sorta makes it sound like one day we’ll all be TaskRabbits, hopping from gig to gig and competing against other taskers at every step. This is cause for concern. To quote a notable recent headline: “If TaskRabbit Is the Future of Employment, the Employed Are F***ed.” A New York Times story published this past weekend that followed the day-to-day existence of some sharing economy “microentrepreneurs” shows that this vision of the future has already arrived for many workers–and the reality is one of grim uncertainty and tough competition.

As for drivers operating taxis or rideshare cars, well, they have more to worry about than diminishing wages. Not long ago, Uber CEO Travis Kalanick made it clear that down the road, he expects that Uber will not employ any drivers at all. Instead, rides will be provided by self-driving cars. And presumably, all the people who would otherwise be drivers will have to jump into the scrum and compete with the rest of the rabbits for whatever work is available.

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MONEY The Economy

Sex Keeps Getting Cheaper Around the Globe

Exterior of the Love Ranch at night
Brad DeCecco

The going rate for sex with a prostitute has plummeted in recent years, according to analysis from the Economist.

In 2006, the price for one hour of sex with a female prostitute averaged $340 around the globe. Today, the average rate is down to $260.

The Economist came up with this data after reviewing the online profiles and listings of 190,000 female sex workers in a total of 84 cities in 12 countries. There are several reasons cited for why the price of prostitution has fallen steadily in recent years, including the migration of poor sex workers into wealthier countries, which has pushed prices down. There’s also some indication that the increased availability of legal prostitution in countries such as Germany has put downward pressure on rates for paid sex.

Overall, the explanation for the decline in the price of sex boils to the same two factors that have affected so many other industries over the last decade or so: The responsibility (or blame, if you will) can be traced back to the Great Recession, and the rise of the Internet’s facilitation of virtually every aspect of life. “The fall in prices can be attributed in part to the 2007-8 financial crisis,” the Economist reported. “The increase in people selling sex online—where it is easier to be anonymous—has probably boosted local supply.”

Increased supply means increased competition, and lower prices in order to win customers’ business. This turn of events should put a smile on the face of folks like comedian Jim Norton, who wrote a stunning pro-paid-sex essay titled “In Defense of Johns” last week for TIME.com.

Naturally, sex workers are upset about the decline in asking prices for prostitution. An analysis by the Economist on all the different ways the Internet has impacted the oldest profession indicates that the shift online hasn’t been all bad for prostitutes, however. By being able to advertise and sell sex online, prostitutes don’t have to rely as much on brothels, pimps, or other intermediaries, so less of a sex worker’s money is going to a middleman. Selling sex on the web is certainly not safe, but it’s considered safer than streetwalking, partly because prostitutes can do rudimentary background checks on clients and share information about violent or abusive customers.

Generally speaking, however, it’s hard to come away after reading the Economist’s investigation and not be depressed. Here’s a group of workers who suffered mightily during the recession years and are still feeling its lingering effects. It’s more difficult to make a living in this trade than it has been in the past, what with clients who have less cash to spend and who have more, lower-priced options to choose from thanks to the Internet and other technology.

That description could be used to sum up the recent plight of many retail employees, travel agents, factory workers, or, heck, journalists. Instead, in this instance, it describes the situation facing women who feel forced to sell sex for money.

MORE: Dear Johns: Actually, You Should Be Ashamed to Buy Sex

MONEY The Economy

Why Sanctions Against Russia May Actually Work This Time

Sanctions aren't always effective, but you have to consider the economic force that Europe and the U.S. can bring to bear.

Economic sanctions leveled against Russia last week by the U.S. and Europe raise a question: Is such pressure effective in getting nations to change their behavior?

Sanctions have been invoked more than 100 times in the past 50 years against dozens of countries, including South Africa, North Korea—and even the United States.

They are a middle ground between war and peace. They often succeed in lowering living standards in the target country, but only sometimes achieve their political objective.

Here are a few examples:

Cuba: The U.S. banned travel and most trade with Cuba in 1960, in protest against the turn to communism by Fidel Castro, whose revolution against the regime of Fulgencio Batista succeeded in 1959. The sanctions have been maintained ever since, though loosened a bit of late. They have probably helped to keep Cuba poor. However, they have not induced any major change in Cuba’s communist system.

North Korea: The United Nations imposed sanctions on North Korea in 2006, trying to discourage it from pursuing its nuclear weapons program and to punish it for human-rights violations. There is little evidence that the sanctions have affected the actions of Kim Jong-Il, North Korea’s former dictator, or his son Kim Jong-Un, the current dictator. North Korea has lived with international sanctions on and off since 1950.

South Africa: In protest against Apartheid, a policy of racial segregation and discrimination by whites against blacks, there were various efforts by countries and by private parties to organize sanctions. The United States got serious about sanctions in 1986, during President Reagan’s term, imposing a variety of trade and capital-flow restrictions.

With Nelson Mandela leading a peaceful uprising by the black majority in South Africa, the country repealed most of its Apartheid laws in 1991. While the economic sanctions were not the only factor leading to repeal, they helped to make the South African government take the opposition’s demands seriously.

The United States. In 1973-1974, the Organization of Petroleum Exporting Countries (OPEC) imposed the so-called Arab Oil Embargo, designed to discourage U.S. support for Israel. The U.S. suffered a recession, but it never abandoned its friendship for Israel, or its practice of supplying Israel with advanced weapons.

The new sanctions against Russia—focusing on the banking, energy and arms industries—are designed to make it refrain from supporting pro-Russian separatists in the Ukraine.

There are two reasons to hope that they will succeed. One is that Russia does have important trade ties to Europe. The other is that sanctions work best when the countries imposing them have more economic power than the target does.

The U.S. and Europe together have more than $33 trillion in gross domestic product; Russia has about $2 trillion.

John Dorfman is chairman of Thunderstorm Capital LLC, an investment management firm in Boston. He can be reached at jdorfman@thunderstormcapital.com.

MONEY stocks

Goldilocks Jobs Report Calms Down Wall Street’s Bears—For Now

The three bears discover goldilocks asleep in their bed they are not amused...
Chronicle—Alamy

While job growth was tepid in July, this was exactly what the markets needed to reverse Thursday's 317-point decline, as pressure on the Federal Reserve to raise rates subsides.

At first blush, today’s jobs report sure felt underwhelming. The Labor Department said that the economy created 209,000 new jobs in July, not the 233,000 that were expected.

Yet what seemed like disappointing results turned out to be exactly what Wall Street needed.

On the one hand, the economy still managed to produce more than 200,000 jobs in July, which marked the sixth consecutive month in which job creation topped that level. That hasn’t been seen since the late 1990s. “July’s payrolls report helps to confirm the sustainability of the strongest labor market expansion since 1997,” said Guy LeBas, chief fixed income strategist for Janney Montgomery Scott.

On the other hand, the labor market was just tepid enough to cool at least some of the hot debate about how the Federal Reserve needs to stop coddling an economy that’s starting to sizzle and hike rates soon.

Immediately after the jobs report was released Friday morning, investors took a deep breath and calmed down following Thursday’s 317-point drop in the Dow Jones Industrial Average.

Though it seemed as if the markets were headed for another triple-digit down day based on sentiment before the opening bell, the Dow and S&P 500 were relatively flat in early morning trading. By around 11:30 am, the Dow had fallen by around 50 points, but that was pretty much all the bulls could hope for:

^DJI Chart

^DJI data by YCharts

The real question is how long will the bears be kept at bay? A week from now, the government is set to release another batch of data detailing worker productivity and labor costs. And if there’s any whiff of inflation in those figures, the bears are likely to awake once more.

MONEY The Economy

For the Fed, There’s Only One Excuse Left to Keep Rates Low

Aerial view of housing development
David Zimmerman—Getty Images

The economy and inflation have now risen to levels where the Fed has to start thinking about raising rates. The only excuse left: the weaker-than-expected housing market.

The pressure is mounting on the Federal Reserve to start raising interest rates — and Fed chair Janet Yellen is running out of excuses.

On Wednesday, the Fed announced that it would keep short-term interest rates near zero and would continue to gradually taper its stimulative bond-buying program as the economy improves. No surprise there.

But the chatter for the Fed to stop coddling the economy really heated up Wednesday morning.

That was when a new government report showed that, after hitting a speed bump in the snowy first quarter, the economy really sped up between April and June. Gross domestic product grew at an annual rate of 4.0% in the second quarter.

What’s more, the government went back and revised some of its estimates for prior quarters. Uncle Sam now believes the economy grew well above the normal 3% rate in three out of the past four quarters.

“With this morning’s GDP release,” says James Paulsen, chief investment strategist and economist at Wells Capital Management, the “is-the-Fed-behind-the-curve fears among investors are increasingly evident.”

The GDP report included preliminary measures of inflation that might not sit well with Wall Street’s inflation hawks.

In the second quarter, the so-called personal consumption expenditure index, which is the Fed’s preferred measure of inflation, grew 2.3%. If you strip out volatile food and energy costs, core PCE still rose 2%. UBS economist Maury Harris notes that this represents a big jump from the 1.2% pace of core inflation in the first quarter. Plus, 2% is the target that the Fed has openly set for inflation.

While the actual level of inflation today may not be so worrisome, the ability to fight inflation after the fact is, says Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. “The challenge with inflation is that there’s a very long lag between policy and price pressures, so a Fed concerned with inflation 12 to 24 months down the road needs to start acting now to protect against the prospect.”

Three years ago, the Fed drew another line in the sand. The Fed back then said that it would not think about raising rates until the national unemployment rate fell to 6.5%. Back then, policy makers thought that this would not transpire until around 2015. However, the unemployment rate fell below this level in April and is threatening to fall below 6%.

US Unemployment Rate Chart

US Unemployment Rate data by YCharts

In recent months, as the Fed has tried to explain why it won’t hike rates soon despite rising inflation and falling unemployment, Yellen introduced a new reason altogether: housing.

In mid July, in a monetary policy report delivered to Congress, Yellen said:

The housing sector has shown little recent progress. While it has recovered notably from its earlier trough, activity in the sector leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing.

Later on in the report, Yellen noted that the lack of traction in the housing sector is probably preventing the labor market from reaching its full potential:

Even after rising noticeably in 2012 and the first half of 2013, real residential investment remains 45 percent below its pre-recession peak. The lack of a rapid housing recovery has also affected the labor market: Employment in the construction sector is still more than 1.6 million lower than the average level in 2006.

In announcing its rate decision on Wednesday, the Fed’s Federal Open Market Committee reiterated that while economic growth in general appears to be returning, “the recovery in the housing sector remains slow.”

The irony is that the two things that are likely to get the housing market on track are low mortgage rates and an improving job market.

To achieve the latter, the Fed is keeping rates low. Yet to achieve the former, the Fed needs to show the bond market that it is serious about combatting inflation. And the worst way to do that is keep rates low.

There, in a nutshell, is Janet Yellen’s conundrum.

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