North Carolina lawmakers created a firestorm when in late March they passed the Public Facilities Privacy and Security Act, better known as House Bill 2. The legislation effectively blocks local municipalities from establishing their own rules against discrimination in public places based on sexual orientation and gender identity, in part requiring people to use the restroom that corresponds with the "biological sex" listed on their birth certificate, denying transgender individuals the ability to use identity-appropriate facilities.
While some politicians and conservative groups have made hay over HB2, the bill has sent the internet and the media into an outright tizzy. North Carolina also has suffered consumer boycotts and backlash from organizations and companies that provide tourist dollars and employment—including PayPal, which abruptly halted plans for a new facility that would have employed around 400 people.
While it could have left well enough alone, mass-market retailer Target parachuted itself in the midst of the turmoil by proclaiming that its existing policy allowing transgender people to use the bathrooms and fitting rooms that match their identity remains unchanged. "Given the specific questions these legislative proposals raised about how we manage our fitting rooms and restrooms, we felt it was important to state our position," Target said.
Target’s announcement immediately sparked outcry among conservative quarters, including the American Family Association (AFA), which launched a boycott that has reportedly garnered more than a million signatures. Target’s brand also seemed to take a hit: Before its restroom access declaration, some 42% of Americans said they’d consider shopping at Target. That number fell to 38% in the days to follow, according to YouGov BrandIndex, which conducts daily surveys on brand perception. YouGov CEO Ted Marzilli called the decline "significant."
From a historical perspective, businesses—and retailers in particular—have positioned their brands to appeal to a wide, apolitical cross-section of consumers, making Target’s public proclamation decidedly risky. But experts say Target may have its reasons for courting controversy—as well as specific messages it wishes to convey.
It's easy to understand why most retailers and brands opt to stay on the sidelines on headline-grabbing questions that roil society. Though many customers may be pleased, others will be offended, and that could mean people walking out of a store—or even worse, never walking in at all. It also could invite protests that block entrances or flood social media feeds.
But evidence suggests that consumers want companies to take a stand. A 2014 study by policy and communications firm Global Strategy Group found that 80% of respondents believe corporations should take action on important issues in society, up from 72% a year before. In addition, 79% say that it’s appropriate for enterprises to advocate on an issue pertinent to their industry (up slightly from 78%), although many also agreed that “companies should tread carefully on controversial issues.”
Target's stance on transgender restroom access is so controversial that a few brand experts contacted by Retail Dive for this story declined to comment, citing the inflammatory nature of the topic. But retail futurist Doug Stephens says that sometimes a company has more than its brand, its shareholders or its bottom line to consider.
“Some would advocate that brands keep their morals to themselves and focus exclusively on what their customers (all their customers) depend on them for—products and services,” Stephens told Retail Dive in an email. “Others see it differently and fully expect that brands take positions on social, political and moral issues that impact the rights and well-being of their staff and customers. I personally believe that the true character and value system of any organization is defined by what it’s willing to lose money over.”
Stephens points to now-famous comments made by Starbucks CEO Howard Schultz during a 2013 investors meeting, after a shareholder complained about backlash the coffeehouse chain suffered over its support of gay marriage. On the spot, Schultz defended Starbucks' position, declaring “Not every decision is an economic decision” and maintaining the company's commitment to embracing diversity of all kinds.
As Stephens notes, Schultz made it clear that Starbucks is more interested in protecting its LGBT customers and employees than its shareholders.
“Far from backing down, Shultz politely suggested the investor consider selling his shares,” Stephens said. “For Schultz, the company’s own moral compass was more important than the views of any of its shareholders. Silence in tumultuous times often seems like the safe corporate play, but if it reads to the public as cowardice it can be even more damaging than a controversial position because it disenfranchises everyone. Ultimately, each company has to weigh every situation as it comes and determine which swords they’re willing to die on.”
Target CEO Brian Cornell hasn’t gone so far as to tell shareholders to sell if they don’t like the restroom policy. He's also taken pains to say that Target's bathrooms and stores are safe, and that most locations have family bathrooms already, something the AFA has called for.
But Cornell has declined to back down, saying that Target has been here before. He reminded CNBC that in the 1960s, Target was among the first retailers to feature African-American models in its clothing ads (for which it also took flak), noting “We’ve had a long history of embracing diversity and inclusion."
Columbia University business school retail studies professor Mark Cohen believes that Cornell, by being so proactive, is doing Target and its shareholders a disservice.
“[Cornell's] demonstrating at best a lack of experience and at worst a lack of common sense and judgment,” Cohen told Retail Dive. “You know, retailers, like any enterprise that works with the public, have to be sure that they faithfully adhere to the law and society’s norms. It’s okay for [Target] to be sensitive to this issue of gender and bathrooms—and they’re based in Minneapolis, so they have a history of being progressive. But this is an issue that has become a lightning rod. If this CEO had a scintilla of common sense, he would do what Wal-Mart is doing, which is to wait this out and wait for the lawmakers to duke it out and decide.”
As Cohen points out, Wal-Mart has so far decided to sit this one out. Though it has been quick to respond to some controversies, as when it pulled items sporting the Confederate flag last year, Wal-Mart has resisted calls to divulge its own bathroom policy, and didn’t respond to repeated requests to do so from Retail Dive.
If companies are going to take a stand, they should know their audience—and the full scope of the matter at hand—before doing so, says Global Strategy Group. “Understanding where public opinion sits today on an issue, and how it may shift in the future, is an important consideration for companies taking positions on hot button political and social issues,” according to its report.
Businesses also should be prepared for pushback on some issues, Global Strategy Group adds, although few could have anticipated the ruckus raised by the AFA, which continues to play out across social media and at Target stores, in sometimes dismaying displays of protest. The AFA, which has led previous boycotts over gay marriage and other LGBT issues, said that people continue to sign its petition to boycott Target, and declined to answer questions from Retail Dive except to say that it’s not fundraising on the petition, that it validates all online signatures, and that its ultimate goal is to persuade Target to change its restroom policy.
There is precedent for businesses declaring controversial positions, then walking back their advocacy. For example, the son of Chick-fil-A CEO S. Truett Cathy once spoke out against gay marriage, but the fast food chain has steered clear of political discourse as its business has expanded nationwide, and even sponsored a gay pride event in Iowa last year.
Retail consultant Bob Phibbs, president and CEO of New York-based the Retail Doctor, said that while Chick-fil-A took a stand for exclusivity, it typically behooves retailers to declare themselves on the side of inclusion on issues of diversity and discrimination. By trumpeting its restroom policy, Target is “on trend,” Phibbs said—and in the end, inclusivity is the best way to reach a wider swath of customers.
“It all comes down to that question of who is our customer, and who is the fringe,” Phibbs told Retail Dive. “They’re all purple, and their money’s green,” referring to the blurring of conservative “red” with liberal “blue.”
The impact of boycotts
Target did not respond to requests from Retail Dive to comment further on its restroom policy or its decision to amplify it, but it is true that more tolerant people happen to be among groups that Target and other retailers are working to attract.
Younger consumers, for example, tend to favor LGBT rights like gay marriage and prefer it when businesses they frequent support those issues as well, Gallup has found. Women and millennials are the most likely to be open to transgender people using bathrooms that match their own identity, with consumers age 18 to 29 expressing tolerance by a two-to-one margin, according to a March Reuters/Ipsos poll. And wealthier Americans, though they may be more likely to vote Republican, are often socially more liberal than other demographics, other studies show.
"When you take a look at [Target's] demographic and where their stores typically are and who their shopper base is, I think they've made the decision that it's wiser to be more vocal about it," Kantar Retail principal analyst Amy Koo told NBC News. "It's a relatively safe position for them to have."
That's also likely why middle-of-the-road retailer Macy's is partnering with two of the LGBT community's staunchest advocates, Sir Elton John and Lady Gaga, on Love Bravery, a limited-edition spring line of apparel and accessories. A year earlier, Macy's also dropped Donald Trump's merchandise, which it had sold for more than a decade, after he said that Mexicans coming to the U.S. were "rapists" and "killers."
There’s another message that Target may want to send: That it’s not only a retailer, but also an innovative, tech-forward company. Its position aligns its sensibilities with the hip, hoodied players in Silicon Valley, who have a record of taking bolder, more progressive political positions more swiftly. That was demonstrated by PayPal’s decision to ditch its North Carolina operations and by Salesforce's threat to leave Indiana over an anti-gay measure, whose repeal is widely credited in part to Salesforce’s willingness to put its business on the line.
The bottom line isn’t the bottom line
No matter what its motivations, the truth is that Target doesn't seem to be feeling much pain from the protest, and it seems unlikely to change course. Boycotts generally don't hurt companies, especially when the boycotts are led by groups whose philosophies run counter to prevailing beliefs. And that’s held true for boycotts around LGBT issues, Bob Witeck told NBC News.
"If you look historically at corporations attacked or boycotted, there's no empirical or market evidence that they ever suffered any specific losses," said Witeck, president of Witeck Communications, a strategic public relations and marketing communications firm that focuses on the LGBT market. "None of these boycotts have legs. They don't last for a long time.”
In fact, retail futurist Stephens warns that bowing to pressure from extremist groups, whose power is greased by social media and online petition-based protest, could lead to far more significant losses in the long run.
“We need to be careful how we define ‘controversy,’” Stephens said. “Recently Old Navy ran an ad showing a mixed-race family—a simple and inconsequential fact of life in America. It only became controversial when the brand was attacked for it by internet trolls and bigots. This warns of an even more profound danger—that, if brands and retailers begin to edit, audit and curtail their communications to appease a lunatic yet vocal fringe, we’ll lose more than just good retailers. We’ll lose ourselves.”
There is some evidence that Target is struggling, but that seems to have little to do with any political flak it may be taking over its bathroom policy and more to do with consumer spending trends that are hurting many stores. "I don't foresee this having a material impact on sales or earnings," Telsey Advisory Group senior managing director Joe Feldman told NBC News. "To the extent that Target is trying to resonate with millennials… presumably, this helps promote that.”
Target’s own comments on the matter bear that out, and should give hope to other retailers questioning whether to make their voices heard.
“We have reviewed the data extensively and determined there was a very minor impact to traffic and sales in a very small number of stores," a Target spokesperson told Forbes when asked about the boycott's impact. "The exact impact on traffic and sales is immeasurable given all of the broader factors that are at play.”