Last week, news broke in California that customer data from a chain of nearly two dozen Lucky and Save Mart supermarkets had been compromised. The credit card thefts were perpetrated using card skimmer technology at the self-checkout POS systems, affecting more than 1,000 San Francisco Bay Area customers. While there are numerous issues that come to mind when reading about the security breach and thefts, including what went wrong, how this happened and who did it, another topic that came to mind was the overall impact it is going to have on supermarket chains as a whole.
At first read, our hearts went out to the consumers that were impacted by this fraud, who had to close bank accounts during the holiday season and who will be without a few hundred dollars that may never be reimbursed. But, if you think a little deeper about the situation, the grocery chain itself is an even bigger victim of the attack. The cost impacts of the thefts go far beyond the reimbursements of the few thousand customers. The negative images of tampered machines, stolen money, and upset customers will have broad impact on the retail brand.
Save Mart, the parent company of Lucky’s, will lose revenue because the scandal will cause customers to avoid shopping at their stores. The company will incur additional customer service costs to handle consumer calls and reimbursements. The chain will also suffer from brand damage, not only in the 20 stores that were affected, but at the other 241 Save Mart-owned stores across California. They may even have to pay for damages should a class action lawsuit arise. And they will have to pay for new POS machines to replace the tampered devices.
There important lesson here for other retail chains is to take security seriously. It is important that convenience stores and retail chains that have highly accessible POS systems employ the proper measures to prevent any form of physical or digital tampering. Failure to do so can have a long and lasting negative impact on customer trust.