Target’s $5 Million Coupon Fix

Written by Evan Schuman
November 11th, 2010

Target on Tuesday (Nov. 9) issued a chain-wide software patch to theoretically resolve a three-and-a-half-month-long coupon-scanning nightmare in which consumers were often given a small fraction of the promised discount. But that was only after it ordered cashiers that weekend to manually review all paper coupons, a move estimated to cost the chain as much as $5 million in additional labor costs alone.

As part of the ordered manual review, Target shut down its POS Cashier Speed-O-Meter system to accommodate the additional time for the manual reviews. Those reviews will cost the chain between $2 million and $5 million in additional labor costs for the month, said IHL President Greg Buzek, who calculated that fee based on an additional minute for every transaction and the number of stores and checkout aisles that Target is using, plus Target’s efforts to add more people to keep the lines moving.

The coupon problem involved manufacturer coupons that required multiple purchases; for example, $5 off a brand of yogurt but only if the consumer purchased six containers. The error came about because the system applied the entire value of the coupon to the first item, and couldn’t discount a price to below zero. That meant if the first item cost $1.10, that was the amount the consumer was credited, instead of taking the full $5 off from the entire six-item purchase.

Sometimes, the glitch gave the consumer a discount that was more than the value of the coupon.

“The issue does happen with that first item,” said Target spokesperson Amy Reilly.

The problem involved Target POS custom coding and did not involve either Target’s POS vendor—NCR—or its coupon clearinghouse, which is NCH Marketing Services, according to people familiar with the glitch.

The Target custom work at issue was “less of a coding matter and more fraud prevention,” said one official. In other words, rules and limits were put in place to prevent someone from gaming the system and it somehow overreacted to the problem, like an overactive antibody that ends up making its human host sick.

One Target source pointed to a recent payment problem with a San Francisco public transit system—where riders could game the system to get free or heavily-discounted rides, by leveraging a convenience function—as an example of the kind of fraud the custom coding had been designed to prevent.

An interesting aspect of the multi-month coupon situation is how Target learned of the problem. The coupon hiccups began in the middle of this summer, but Target corporate didn’t officially become aware of it—in a meaningful way—until early August.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.