Inside Target: How Buyers Game a Broken System

Target, America's third largest retailer, has been the source of multiple recent leaks to us from employees at all levels detailing the company's myriad problems. Today: a detailed look at the life of a Target buyer, and how they game both vendors and the company itself.

Target was hit with a computer "glitch" this weekend that caused long delays at checkout lines across the country. It was just the latest stumble in a company that has fired its CEO, had its computer system hacked, and seen its Canadian division become a billion-dollar fiasco, all in the past six months. Target has problems. What's going on in that big red box?

Today, an employee inside Target explains in illuminating detail the company's buying system—what buyers do, how they cheat the system, who dislikes who, and what's wrong with Target's buy side operations. The employee also speaks on what they see as the general flaws in Target's corporate culture. It's quite interesting. Enjoy.

There are four types of buyers.

Internals are those who started as a Business Analyst right out of college.

Internal Externals are those who transferred from a department outside of merchandising.

Experienced externals are those hired from another company, i.e. Macy's, JCPenney, etc.

MBA Externals are those hired from business schools. They come in at the highest buyer level (17) and earn a six-figure salary. They generally do two buyer 17 rotations and are promoted to Sr. Buyer.

It's common knowledge across the company that internals resent MBA externals. We view them as know-it-all arrogant hot shots who come in from out of state and jump the line to Sr. Buyer. MBA externals can become Sr. Buyers without ever doing a role in Merchandise Planning (i.e. inventory management). It's not unusual for internal Sr. Buyers to be more critical of MBA externals or to drive more/unnecessary workload, especially if they find out that the MBA external is making a higher salary, which is common. Sr. Buyers also have the power to subjectively lower their buyers' annual review score to prevent or lessen their bonus.

It'll be interesting to see if Target continues to recruit MBA buyers now that [former Target CEO] Gregg [Steinhafel] is gone. He was an MBA external from Kellogg and the MBA internship program began under his tenure.

Forecast: Buyers forecast once a month for the next three months. They must forecast sales, margins and markdowns by week. Each month, the Divisional meets separately with each team to review last month's forecast/performance, and preview the upcoming three months. Every Buyer forecasts as conservatively as possible in order to "beat" their forecast. It happens so often that it's internally referred to as "sand bagging." The reason is simple: if you beat your forecast, your Sr. Buyer and Divisional won't ask questions. If you miss your forecast, you are grilled to death in front of your team and viewed as not meeting expectations. If you ask any buyer, they'll tell you forecasting is a joke and huge waste of time. It takes up two weeks each month and is the most hated part of the buyer job.

They're difficult because managers expect buyers to be accurate even though consumers are fickle, promotions constantly change at the last minute, unpredictable weather can impact sales, many other factors outside our control can affect sales and if you miss your forecast, you face tough questions from your sr buyer and divisional... Lately, sales have been so bad buyers aren't sandbagging, they're just reflecting the poor sales they expect. What's been frustrating is that Sr. Buyers keep telling buyers to be accurate but if we are, they say they don't like the "story" and make us change it. Then we raise our forecast, miss sales, and get chastised during the forecast meeting.

Vendor Income: VI is money paid by vendors for things like promotions, in-store displays, ads, etc. Buyers are allowed/encouraged/pressured to find creative ways to get as much VI as possible out of vendors. Nothing is off limits. I've seen buyers charge for ads in the circular, in-store displays (internally called company space), for bringing in additional SKUs, for prime shelf placement, etc. There are no rules and buyers have free reign to charge VI whenever and however they want. VI goes into margin ie profit, which is why Sr. Buyers and Divisionals allow it. They simply turn a blind eye to how it comes in, even if the circumstances are questionable. I've seen buyers lie to vendors in order to get VI. The most common one is to tell a vendor that their competitor is offering say $25k to get a company space display but the buyer will give the space to that vendor if they match the offer. VI also allows vendors to offer better margins under the table. Many vendors cannot lower costs below a certain amount, so they'll offer VI to improve margins so they can tell their other retailer partners like Walmart that every one is getting the same costs. I'm sure collecting VI is perfectly legal but the lack of any policies and rules opens it to abuse which vendors would probably be furious about if they knew some of the things buyers do to squeeze out every dollar. [VI] is 10-12% of my category sales.

Comp shop: Target has an entire team dedicated to comp shop. They send out shoppers to Walmart every week to compare prices. If an item is "comp shopped," it means Walmart has priced it lower and it is automatically dropped down to match it. Buyers hate being comp shopped because it compresses their margins. Most buyers are able to negotiate or pressure their vendors to give VI to maintain margins when their items are comp shopped. However, most of the time, the category takes a margin hit. When a buyer brings in a new item, they're supposed to check if that item is also at Walmart and what it'll retail at. If it's carried at WMT, they're supposed to report it to the comp shop team. Instead, most buyers "forget" to tell the comp shop team and feign ignorance when they're busted. Sr. Buyers also turn a blind eye to this because it boosts margin for their department, even if it's only temporary.

Target doesn't allow team members to keep the miles when they travel for business. They use the miles to upgrade executives to business or first class. It's one of the many cheap things Target does.

Target calls itself "Fast, Fun and Friendly." Each team has an FFF captain who is in charge of organizing fun activities for their team, such as frozen yogurt runs and happy hours. Other than FFF events, the motto is a joke. It takes forever to do anything at target. It's very bureaucratic and surprisingly hierarchical even though executives constantly say they have an open door policy. It's not fun when sales are bad because the pressure to increase sales is enormous. And the friendly is superficial and fake. Minnesota Nice at its best. Given the sudden firing of the CEO and the multiple rounds of layoffs, the credit card security breach, dot-com still hemorrhaging money, amazon stealing team members left and right, and Canada as a huge failure, morale is at an all-time low...

Target has a Minnesota Nice culture. It's common to agree with an idea to someone's face, then criticize it behind their back later. It's common to be passive aggressive. Managers say they like it when subordinates play devil's advocate and express disagreement, but those who disagree are viewed as negative, poor team players, and uncollaborative. In other words, agree and support everything your manager says if you want to get promoted.

Merchandise teams eat lunch together. Every day. Those who eat at their desks or with other friends are viewed as bad team players. The only exception is if you have a vendor lunch. Or it's Friday...

Target claims to be family friendly, but it's not. They don't offer any paternity leave. There's no on-site daycare. Managers are not supportive of pregnant women or new mothers who want or need to work from home.

Target claims to offer work life balance but that doesn't apply to merchandising. Buyers spend their entire day in meetings, then are expected to respond to hundreds of emails at night. In 2013, all buyers got iPhones from the company so that they could be reachable at night and on weekends.

Work.different: This initiative was launched in 2013 to help team members be more creative and efficient in completing their work. Desktop computers were replaced by laptops. Desk phones were replaced with headsets that plug into our laptops. We now receive calls via Lync. The idea was that we can work anywhere and be accessible anywhere our laptop is. This didn't work out for buyers because managers were not open to buyers replacing meetings with phone calls and video conferences. Like many other great ideas, this one fizzled because management is resistant to change. This may have worked out better outside of merchandising but I do know that within merchandising, it was a bust.

Previously

For our full archive of Target reporting, see here.

[Photo: Flickr. Contact the author of this post at Hamilton@Gawker.com]