The Good, the Bad, and the Ugly

2018: State of the Retail Nation

The Good, the Bad and the Ugly

By Lee Peterson

Amazon’s rise has radically altered consumer expectations of the traditional store, but there’s also a lot of good news out there for retailers. Shifting consumer sentiment always operates as both a threat and an opportunity—and some brands are stepping up. In our latest research report, find out which brands shoppers think “gets” them, or if they don’t care if the brand goes away tomorrow. Our study examines the good, the bad, and the ugly in the retail marketplace today.

Why it matters

Traditional retail brands are responding to the Amazon threat with a variety of innovations to stay competitive, creating clear divisions in the marketplace. Our results show brands consumers classified as good, bad, and ugly, garnering insight into how consumers evaluate them, and how they rate the performance of key attributes. Most importantly, it uncovers which innovations most influence purchase behavior.

3,000 consumers were surveyed and segmented into two distinct groups: digital Natives, young people raised in the era of the Internet, and Digital Immigrants, adults who witnessed the explosion of digital technologies. The research strives to find a baseline of sentiment among shoppers, both online and in store, to understand what brands in the marketplace they saw as good (winning), bad (“meh”) or ugly (losing).

Brand Awareness Across Demographics

It still matters, of course, and the results surfaced how awareness changes for brands, especially when told through the eyes of Digital Natives v. Digital Immigrants. Although these two distinct demographics shared 9 of their top 20 retail brands, digital natives were more likely to have apparel brands represented than Digital Immigrants (who had none).

Amazon dominated both in awareness and in winning affections, topping the “good” list across demographics. Not a surprise considering the online shopping giant has created a value proposition with relevance for virtually everyone. Amazon can flat-out make anyone happy—an 11-year-old going online to order a fidget spinner to a 75-year-old tracking down fishing gear.

Getting Beyond Awareness and Down to The Good, The Bad, and The Ugly

The Good: Eight out of 10 consumers rated Amazon as having “a great future,” a universal appeal unrivaled among other brand results. Home improvement, discount department retailers and big tech brands form a secondary tier of brands considered “good.”

The Bad: These are mostly brands serving specific segments of the population, and have less broad appeal across shopping categories and tended to be in more merchandise categories. These brands meet consumer needs at certain times but may
fall short of being “good” given the limited products that they offer.

The Ugly: These brands failed to be relevant to a wide enough portion of consumers. Note, while some of these retail brands
are struggling in their categories, such as specialty apparel brands, there were some brands that still dominated their categories. Interestingly, in every case these were mall-based retailers.

Why Big Box Makes Consumers Feel Good

The top-ten “good” rankings were dominated by big-box and consumer electronics retailers. Big-box retailers are scoring high because of one thing: They are delivering tactically. It’s reflective of a longstanding truth about brick- and-mortar retail: The fundamentals matter. For example, check-out continues to be a big deal as it ranked the number 2 most important feature for a brand just behind ease of navigation.

The Specialty Retail Dilemma

The news is down right ugly. Consistently, across the board, specialty retailers fared poorly—making up the bottom 10 of the 100 brands surveyed. One thing is clear, specialty retailers have played it safe for far too long. It might have once seemed normal to spend an entire afternoon to go to ten different stores in search of the perfect shirt. That’s an absurd proposition for many shoppers today, who would rather spend those ten minutes searching online for what they want.

Digital natives, and even digital immigrants, still crave and want the social experience of a physical store. And no one is better positioned to pull off experiential retail than specialty brands. But most aren’t embracing store innovations, from mobile apps to gathering spaces and showroom stores. It’s time for specialty to innovate before it’s too late.

What Makes Good Brands Good Today

The research helped gain a clearer picture of the growing importance of in-store innovations, and how consumers view them. Respondents ranked key retail innovations, including showroom store, endless aisle, buy online pickup in store (BOPIS), retail mobile apps, food service on site, experiential retail, artificial intelligence, and pop-up stores. The goal was to understand which retail innovations could/would influence purchase decisions today. The results were unequivocal: Showroom stores were viewed as the single most influential innovation to potentially drive purchase today.

Where are The Worst Retailers Failing The Most?

Connecting with consumers in a personalized way remains the most striking failure among the retailers ranked worst, coming in at 53%. Respondents said that they’re more likely to purchase from a retailer based on receiving personalized communication from them. With an increase in marketing noise and a loss of personal touch, people are yearning for more relevant, human communication.

The Digital Divide

Overall, Digital Natives prefer tech-oriented brands, while Digital Immigrants prefer home improvement brands. Not surprisingly, Digital Natives are much more receptive to new ideas and store innovations, especially when it comes to technology.

Digital natives mediate everything in life—including shopping—through the medium of mobile first. But they still want something social. They want gathering spaces, even more than they want showroom stores, but they still very much want showroom stores, with 60% ranking them as influential on purchase behavior.

Showroom stores have broad appeal, and scored high with both consumer segments, leading us to believe it needs to be tested much more. They’re the most sought after innovation across demographics, with the least gap in desire between Digital Natives and Digital Immigrants.

Three Takeaways

The redefinition of SERVICE. Walmart, rated very high, has innovated in countless ways to serve the customer better in the online channel. Amazon has also completely redefined the meaning of service. Service today is about knowing your consumer better than anyone else out there and focusing a brand’s value proposition on how to meet very specific wants and needs.

Walmart v. Amazon: The superpowers of commerce ranked. Walmart fared very well in the study, ranking second to Amazon. This high- ranking is related to Walmart’s consistent delivery of the basics consumer needs in their everyday life. Much of this can be attributed to Walmart’s exceptional price positioning in consumers’ minds.

The Ugly Truth About Price. Everyone likes a good bargain. This is not changing. There’s no honor or wisdom in paying full price for anything that’s a commodity. Amazon responded, and following its acquisition of Whole Foods, took no delays in upending the brand’s perceptions, seeking to dismantle the Whole Paycheck moniker. Amazon has immediately offered lower prices on staples like bananas, avocados, almond butter, responsibly farmed salmon, and organic large brown eggs. It’s Amazon Prime members aren’t being left out, either.

But given our results on innovative concepts, price isn’t the only thing driving brand perception.
Failure is a very real possibility for many retail brands, but so is survival. This moment demands big, bold decisions, and will reward brands willing to see further into the future, but act now to prepare. This is also an economic moment marked by rapidly changing consumer sentiments. Adapt quickly enough, and flank the competition.

Get the whole paper and additional research methodology here

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Lee Peterson
Lee Peterson
Executive Vice President, Thought Leadership, Marketing
WD Partners

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