Target weighs options after deadly factory collapse, fire in Bangladesh

As the nation's top retailers weigh how to respond to a deadly factory collapse in Bangladesh, Target Corp. said it will remain in the country — at least for now.

"We routinely evaluate the countries where we currently source as well as potential new countries," spokeswoman Amy Reilly wrote in an e-mail. "I have nothing further to share about our future plans in Bangladesh."

Last week, Rana Plaza, which housed two factories that manufactured clothing, collapsed, killing more than 400 workers. The incident comes just five months after 112 workers perished in a fire that engulfed another factory in Bangladesh. As a result, Walt Disney has reportedly pulled out of the country. Companies like the Gap, Wal-Mart and Loblaws say they are reviewing operations there.

"This is not about a few bad apples but thousands of buildings in violation of fire and safety codes," said Liana Foxvog, a spokeswoman for the International Labor Rights Forum. "This happens all of the time."

Target has said that it hadn't "knowingly" used factories involved in both incidents. But in reality, all retailers tap into the same low-cost international supply chain network that helps keep them profitable, said Amy Koo, an analyst with Kantar Retail consulting firm in Boston.

"All of them use the same groups of people," Koo said. "They move in packs, looking for the cheapest labor."

Nevertheless, one wonders "how well does Target understand its own supply chains?" she said.

"Target will not knowingly do business with a factory that cannot meet Target's ethical and safety standards," Reilly wrote. "In Bangladesh, we use our own internal, unannounced audit process and our own auditor to ensure vendors are meeting our standards."

Target declined to make public its audit reports. But in its 2011 Corporate Sustainability Report, Target acknowledges severe fire safety problems in Bangladesh.

"In Bangladesh, we are concerned about the lack of fire prevention practices and have taken action to increase awareness and prevention," the report said.

As a result, Target exited two "high-risk buildings" and reduced risk at two more with training and building modifications. The report, however, does not mention the structural integrity of the factories.

In recent years, Target said it has reduced by half the number of factories it uses in Bangladesh to consolidate "business with factories that have committed to better safety standards. This consolidated factory base also enables us to better and more closely monitor the factories we use."

And the percentage of audits in which Target found "severe" violations at factories, and therefore pulled its business, rose to 2.2 percent up from 1.3 percent in 2010.

Despite the internal audits, problems persist, Foxvog of the International Labor Rights Forum said, which is why Target and other retailers need to sign onto legally binding agreements that would hold them liable for the safety of the factories. Target, she said, has so far declined to sign on.

Koo, the Kantar analyst, said Target will no doubt feel the pressure to withdraw from Bangladesh because of public outrage over last week's building collapse. Even if Target does pull out, the company will still face the same questions no matter where it goes, she said.

"Target needs to balance reputational issues with the need to keep costs low," Koo said. "Do their customers care about this thing and are [they] willing to pay extra? Do they think [the issue] is worth it?"