‘Racist’ brands get a market beat-down, among other things

Racial profiling and incidents fueled by hate are back in the news. In the latest of incidents, Nordstrom Rack, owned by Nordstrom Inc. (JWN), was blamed for falsely accusing three African-American men of stealing from a Missouri store. The young men were shopping for prom clothes when they found themselves being allegedly followed around by an employee and then insulted by a female shopper.

Although they made a purchase, upon leaving the store they were stopped by police officers who told them they had been accused of theft by the store. The men were let go after they cleared themselves of suspicion on producing their receipt. After the incident went public, Nordstrom Rack apologized to the three customers and their families and assured that they would review their internal policies to make sure these kinds of incidents never reoccur.

Nordstrom’s stock apparently has a history of falling during the month of May according to a report by Forbes, especially following its quarterly earnings. Nordstrom is set to report earnings on May 17. So far this incident has not impacted the company’s shares negatively but it certainly can do without any negative publicity.

In a separate incident, three visitors hailing from the African-American community were questioned by police in Rialto, Los Angeles, as they were leaving an Airbnb rental. A neighbor had called 911 assuming that a burglary was taking place. Although the matter was reported as a misunderstanding, the visitors said they were mulling a lawsuit.

Nordstrom Rack assured that they would review their internal policies to make sure these kinds of incidents never reoccur

These incidents follow the recent Philadelphia Starbucks controversy in which two African-American men were arrested on complaints of trespassing by Starbucks employees who said the men were sitting in the café without ordering anything. The men, who were waiting for a friend, eventually settled the matter with the city for $2 as a symbolic gesture and a promise by officials that an investment of $200,000 would be made to support young entrepreneurs.

This incident even led to Starbucks announcing that they would close their stores nationwide for a few hours to conduct racial-bias training on May 29. This will prove expensive for the company, but its efforts in crisis management have been appreciated. Despite calls to boycott the company, Starbucks did not see a drop in sales after the episode.

Earlier this year, Gap Inc.’s Old Navy brand fired three of its employees for racially profiling a customer at one of its stores. Last month, Target was ordered to pay over $3 million to settle a lawsuit that claimed the retailer deliberately avoided hiring African-Americans and Hispanics on the basis of criminal background information.

Discrimination is not limited to people of minority communities. Last week, Darden Restaurants agreed to pay $2.85 million in a lawsuit settlement which alleged that its Seasons 52 restaurant chain rejected applicants aged over 40 years and said they did not want to hire “old, white guys.”

Racial profiling or discrimination can cause severe brand damage. When dealing with sensitive issues, corporates need to take steps to be extra cautious, because one unfortunate incident is enough to spoil years of hard work and reputation.