By John Bajorek
T’was the best of times and t’was the worst of times for retailers this past year. Brands have been responding to the shifting market with creative innovation: Specialty retailers are going off the beaten path with pop-ups and personalize-able merchandise, drugstores are making a play for beauty, and retailers across the gamut–from banks to grocery stores–are doubling-down on the customer service potential of mobile apps.
We recently released our annual study, The Good, The Bad & The Ugly, where we surveyed 4,000+ consumers inviting them to share their opinions on 100 of the top brands. Respondents used a rating system to signal if a brand is “Good” (gets them and holds a meaningful place in their life), “Bad” (not for them, but can see why others might like them) or “Ugly” (doesn’t care if this brand disappears tomorrow). In addition to slicing the results into all the traditional demographic views, we like to see how the various verticals are stacking up against each other. Here’s how the various verticals stacked up.
Let’s get straight to the good stuff…the Ugly brands. No one likes to hear their baby is ugly, but we’ve got some bad news for a few brands. When it comes to ranking the worst of the worst, both Digital Natives (18-29) and Digital Immigrants (46 and older) 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.
Carvana isn’t sitting well with Immigrants and saw the largest spike in Ugly ranking for that segment YOY. Similarly, Forever 21 saw an increase in its Ugly ranking compared to the previous year.
Specialty retail represents a few of the top and most of the ugliest brands of 2018. Even though specialty signifies a niche audience, it’s a broad sweeping term that encompassed exactly 50% of the brands in the study so we segmented that vertical even further to see where the Good & Ugly were.
While consumer electronics, personal care, and crafts were bright spots; specialty retail brands made up 7/10 of the worst performers in 2018. Jewelry led the charge, closely followed by specialty apparel––both of which were presumed to be high performers going into 2018.
It’s true that specialty retailers are uniquely positioned to offer in-depth brand expertise and customer service in their particular vertical, so why are some of the leading specialty brands—Lululemon, Cartier, and Tiffany’s, among others—ranked as some of the worst of the worst on this year’s blacklist? The answer is two-fold. First, is the inability to connect with the next generation of consumers. Second, is the inability to justify the cost.
Authenticity reigns when it comes to attracting Digital Natives. Unfortunately, many of our lowest-ranked specialty brands have diverged from their original brand message in attempts to recruit new customers… alienating their core customer base in the process. Take Tiffany’s recent commercial featuring Elle Fanning, for example. The commercial begins with Elle gazing into a Tiffany’s window to the tune of Moon River, bringing to mind the nostalgic Audrey Hepburn film. So far… so good, right? Then a loud record scratch gives way to a DJ saying “I ain’t window shopping today,” followed an aggressive break-dance routine characterized by aggressive ring-flashing that feels anything but authentic to Tiffany’s heritage brand.
The Good, the Bad, and the Ugly rankings show that both Digital Natives and Digital immigrants look for value when determining where to lay down their hard-earned cash and many of our worst-ranked specialty retailers have high-prices in common. Of course, not every brand can be an IKEA or an Aldi, but specialty retailers can take a page from the book of Starbucks, our top specialty performer. A strong loyalty program, relatable and transparent mission statement and consistent product, coupled with an active online community make this coffee giant a brand to watch and learn from.
One thing is clear, for too long, specialty retailers have played it safe. Granted, other changes have hurt specialty, but the category isn’t doing enough to make up for lost ground. It might have once seemed normal to spend an entire afternoon to go to ten different stores in search of the perfect polka-dot shirt. That’s an absurd proposition for many shoppers today, who would rather spend ten minutes searching online for what they want. Amazon is gunning for a better position in the apparel business proven by the launch of Prime Wardrobe, a wardrobe subscription service, the growth (and push) of Amazon’s private label clothing and the fact that Amazon has become a not-to-be-overlooked DTC channel for clothing brands.
This shift in consumer behavior has negatively impacted specialty retailers. Shoppers are now accustomed to not having to look so hard for anything anymore. But product, ironically, is also not the fix, even if specialty retailers keep obsessing over getting the right product mix, or riding the latest fashion wave. You can get any product any time when you’re anywhere, so it’s almost impossible to be exclusive today.
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 and showroom stores 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. Specialty retail, of all categories measured, has the furthest to go.
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.