The Good, the Bad, and the Ugly

2019: State of the Retail Nation

The Good, the Bad and the Ugly

By John Bajorek

(Pssst…be sure you read the whole article. At the end you’ll find a link to download the complete white paper for FREE!)

The past year hasn’t been an easy time to be in retail. Social media has changed the way customers find out about brands and how they evaluate them. Consumers are using peer reviews on sites like Google, Facebook and Yelp to inform purchasing decisions and one vocal customer who had a bad experience can severely damage a brand. On top of this, customers are doing the bulk of their shopping on a mobile device and the icing on the cake is that even digital immigrants are beginning to behave a whole lot like those perplexing millennials.

What Is the Good, the Bad, and the Ugly?
And why you should care

This is a time of unparalleled change in the retail industry. The value indicators by which consumers evaluate brands today are not the same ones they would have used ten years ago, or even one year ago. Some retailers don’t learn what customers want from their brand until it’s too late. We created The Good, The Bad, and The Ugly for this reason: To break down which brands are killing it in the new consumer market (the good), which brands are scraping by at base level (the bad), and which are about to get pulled down by the undertow if they don’t make some big changes soon (the ugly).

As a second annual report, we also weigh 2018 data against last year’s numbers to learn why companies ranked how they did, which factors contributed to each brand’s respective success or failure and who made the biggest moves (up or down) year over year. Over the last two years we asked 7,000 customers with annual incomes over $35,000 and a geographic make-up representative of the total US population, to evaluate 100 of the most well-known brands in retail today.

The questions we asked are simple:

  1. Which of the following retailers are you aware of?
  2. Considering each of the retail brands you are aware of, please rate them as:
    1. Good (this retailer ‘gets me’, takes care of me and has a great future)
    2. Bad (this retailer is just ok, they’re not my favorite, but they serve a purpose
    3. Ugly (I don’t care if this retailer disappears tomorrow)

We found that how a customer ranks brands is dependent on whether they grew up before or after digital technologies such as smartphones and social media became widely adopted, so we segmented respondents’ answers based on whether they fell into the category of Digital Natives (age 18 to 29), or Digital Immigrants (age 46 and older).

Lastly, we asked customers to “fill in the blank” on their favorite and least favorite brands:

  1. Name ANY retailer that serves you and its customers the BEST.
  2. Name ANY retailer that serves you and its customers the WORST.

This allowed us to identify over-arching themes in customer behavior and prevailing sentiments about today’s top and worst brands.

The Best and the Ugliest
A point of comparison

2018 was the year that small store concepts such as Nordstrom Local came to roost and the catch-all retail behemoths of the past – cough-cough, Sears and Kmart – were falling by the wayside in favor of more intimate concepts. Big box stores that cracked the code to offering great customer service at scale, however, still reigned on The Good, the Bad, and the Ugly’s “Best of” list.

What makes a brand the “best?” Customer service, value and product selection are the top three factors respondents listed. The continued value retailers have is evidence that, even though the recession is over, there is glory to be had for retailers who are able to scale selling quality goods at a lower price.

Top 10 Retailers of 2017

  1. (22%)
  2. Walmart (15%)
  3. Target (9%)
  4. Kohl’s (4%)
  5. Costco (4%)
  6. Macy’s (3%)
  7. Best Buy (3%)
  8. Apple (1%)
  9. Nordstrom (2%)
  10. Aldi (1%)

Top 10 Retailers of 2018

  1. (21%)
  2. Walmart (13%)
  3. Target (7%)
  4. Kohl’s (5%)
  5. Costco (4%)
  6. Macy’s (3%)
  7. Best Buy (3%)
  8. Apple (2%)
  9. Nordstrom (2%)
  10. Aldi (2%)

Of course, for every brand that lands a spot in the “Top 10” list there’s another brand that’s dropping the ball and alienating their loyal customers.

Worst 10 Retailers of 2017

  1. Walmart (27%)
  2. Kmart (6%)
  3. Sears (6%)
  4. Target (5%)
  5. Macy’s (3%)
  6. Best Buy (2%)
  7. Starbucks (1%)
  8. JCPenney (1%)
  9. AT&T (1%)
  10. Kohl’s (2%)

Worst 10 Retailers of 2018

  1. Walmart (21%)
  2. Kmart (5%)
  3. Sears (5%)
  4. Target (5%)
  5. Macy’s (2%)
  6. Best Buy (2%)
  7. Starbucks (2%)
  8. JCPenney (2%)
  9. AT&T (1%)
  10. Kohl’s (1%)

This Year’s Movers and Shakers

Customers were asked which brands “‘get them,’ take care of them, and have a great future,” and all of the usual suspects – Amazon, Walmart, Home Depot, etc. – made the Top 15. Aldi and Dollar Tree were the big social climbers this year, with a YOY increase of 7% and 6%, respectively… showing that customers respect (and remember) the brands that give them the products they want at competitive prices. But beyond price, Aldi has made valiant efforts from a revamped store layout, a robust advertising budget and rebranding campaign as well as major brick and mortar growth strategy in order to reframe their brand image to be about quality first and price second.

The Best & Worst of 2018
…and which brands are just scraping by

When it comes to ranking the worst of the worst of 2018, both Digital Natives and Digital Immigrants agreed that tween retailer Justice should be the first to walk the plank. Specialty retailers made up a majority of the list for both segments, as this struggling vertical fights to remain relevant across the board. (recently purchased by Walmart) ranked way ugly with Natives, in addition to seeing a major spike (in the wrong direction) from 2017’s ugly ranking. Similarly, Carvana isn’t sitting well with Immigrants and saw the largest spike for that segment YOY.

It’s not shocking to see both Amazon and Walmart appeared as top ranked good brands for Immigrants and Natives. Walmart saw quite the jump for Natives with an increase of 11% YOY.

Most interesting to note is the number of brands ranked as good by Natives & Immigrants. The below charts show you ONLY the brands that were cited by 50% or more of respondents. This means that there are 96 brands that had less than 50% of Immigrants rate them as good. Whereas the Digital Native’s list is much more robust, implying the younger segment is more open to brands as a part of their lives. Additionally, if you scrutinize the brands on the Natives good list, you see names like Ulta, Apple, Nike, Starbucks…all brands that are making meaningful content, experiences and innovations in the market versus sitting idly by as the industry changes around them.

So What?

Our findings show that a retailer’s agility is the true differentiating factor between which brands succeed and which become irrelevant. Mobile is a big part of this equation. As mobile is poised to usurp laptop use1, the retailers that learn how to create competitive mobile offerings will be the ones that excel in the years to come. Customer service is no longer a physical-only proposition… just take a look at how quickly the banks that offer mobile check cashing options edged out the competition.

Yet retailers can’t just lock down a strong mobile strategy and call it a day. While Digital Natives expect brands to adapt to respond to their generation’s preferences, there will be no room for retailers that lose their authenticity along the way and those that do so risk alienating young consumers and Digital Immigrants (think Abercrombie & Fitch abandoning their white-washed, scantily-clad models to sell professional wear to millennial professionals… and then trying their hand with Gen Z when that didn’t catch on).

Download the full report (for free!) to see the complete list and rankings of all 100 brands as well as our deep dive into the findings and implications for the state of retail in 2019.

John Bajorek
John Bajorek
Executive Vice President, Strategic Growth & Innovation
WD Partners