Target Gives $3 Million a Week to Its Communities. Q: Aren't Its Prices Too High, or Wages Too Low?
The Minneapolis-based Target Corporation makes a big deal about its "caring for the community" and brags on its website and in its stores that "since 1946, Target has given 5% of our income - which today totals more than $3 million a week - to our communities" (see graphic above).
Q1: Doesn't that mean Target is really overcharging its customers with "everyday high prices" in amounts that are sufficient to generate the $3 million necessary to give those dollars back every week to the very communities where Target shoppers live?
Q2: Couldn't Target give the $3 million back to its communities more directly by just lowering its prices, or having more sales?
Q3: Alternatively, if Target has $3 million every week to give back to its communities, doesn't that mean Target is really underpaying its employees in amounts sufficient to generate the $3 million extra it needs to give back to the very communities where Target employees live?
Q4: Couldn't Target give $3 million to the communities it serves more directly by just increasing its wages for hourly employees, who are members of "Target's communities"?
Q5: What does Target mean by "our income"? Isn't that really the shareholder's income, and why is Target management spending $3 million of shareholder income every week on community giving?
Q6: Couldn't that $3 million per week be paid out in dividends to shareholders, who could then decide how best to spend their money?
Bottom Line: Isn't Target's strategy just a deceptive publicity stunt or public relations gimmick that allows it to overcharge customers with high prices and/or underpay its employees with low wages, under the guise of a "caring corporation"?
I'd love to see this advertisement from a retail giant:
"Our rock-bottom prices are so low and our wages are so high that we give money directly back to our communities daily through our "everyday low prices" and "everyday high wages." We believe that's a more effective, direct and honest strategy of serving our communities than if we were to over-charge customers with high prices and/or under-pay employees with low wages and then generate publicity by bragging about how we give back 5% of our inflated profits to the community. Our goal is to cut out the charitable foundation middlemen with expensive overhead, bureaucracy, and administrative costs, and serve our communities by giving money directly to our customers and employees through low prices and high wages. Our commitment to publicized community giving is 0%, because we've already given everything we can through low prices and high wages, and after a normal rate of return for our shareholders, we've got nothing left to give back."
Update: The chart below shows the performance of Target (blue line) vs. Walmart (green line) over the last five years -- Target stock has been flat (0% return), while Walmart stock has appreciated by 60% since 2007. While other factors could certainly be playing a role in the financial performance of the two companies, we do know that Target was selling for about $60 in August of 2007 and it's selling for about that same price today. During the same period, Walmart's stock has increased from about $45 to $75. Judging by their stock prices, Walmart's "everyday low prices" is apparently a more effective corporate strategy than Target's strategy of high prices and $150 million a year in community giving? What might Target be selling for today if instead of spending $750 million over the last five years on charity, it had repurchased $750 million of its shares?