Retail Brand Clout Fades as Savvy Consumers Shop Around

A retail industry trend that was gathering steam just before the pandemic struck is now back in the news with a report that suggests profound changes are developing in consumer behavior.

Retail industry observers are starting to ask if brands matter anymore. Maybe, but not the way they have. Branding is in the midst of a complex marketing revolution.

The harbinger at the moment is food inflation. “Consumers Fed Up With Food Costs Are Ditching Big Brands,” was the headline on a recent story in the Wall Street Journal about how inflation and private label competition are squeezing companies like Starbucks, McDonald’s, and Kraft Heinz.

As of March, overall food prices rose a relatively modest 2.1% versus a year ago, according to the Labor Department’s Consumer Price Index report. Buried in that report was the fact that the price of food consumed “away from home” surged 4.5%, reaching sticker shock level. In California, a McDonald’s bacon and egg bagel with coffee will set you back nearly $10.

Grocery shoppers are embracing store brands of packaged goods that can be half the price of leading national brands. As we recently reported here, 2023 seems to have been a tipping point. More than half of consumers in an industry survey said private label goods are very or extremely important in deciding where they shop. There’s more to this than the price of food.

Consumers appear to be “de-branding” their behavior in general, and the pace is quickening.

The trend has been developing at least since 2019, when we were talking about “paid influencer fatigue,” and Gen Z-ers began relying instead on reviews of people they trust and online communities.

Social scientists find Gen Z-ers the least brand loyal generation, in part because they have seen so many digital brands come and go, or–in the case of Facebook, Google, and Twitter–were clumsily rebranded (Meta, Alphabet, and X). Consumers in general are more savvy than ever, with instant access to reviews, comparative pricing, user-generated videos, and detailed information about almost anything one could imagine wanting.

“The Internet and access to information has leveled the playing field to the point where a no-name with a better collection of raving fans can compete with the largest brands in any industry,” says small-business consultant John Jantsch, author of the best-selling book “Duct Tape Marketing.”

In an undated blog titled “Why Brands Don’t Matter Anymore,” he says, “Sentiment is one of the hottest measurements online these days and it’s a marker of true loyalty. Do people talk about your brand in the language of likes, shares, and pluses? … These are the new currencies of marketing success and demonstrate the true value of a strong brand even if you’ve never heard of them yet.”

Artificial Intelligence (AI) is accelerating the decline of brand clout, according to business consultant Rei Inamoto. AI “may be the end of brands as we know them,” he wrote last year in a post on the fastcompany.com website. “The landscape has shifted so much that an individual can now have more sway than an institutional brand. A brand can also be lifted up to new heights or brought to its knees by an individual.”

Brands as we used to know them may be losing their punch, but the best retailers are figuring out how to create loyalty and build a following. Levi’s is in the process of reintroducing itself as a “denim lifestyle brand.” Creating a sense of community with customers is the new marketing normal. Sports retailers are learning to build loyalty by sponsoring community events and engaging with schools and community groups in developing athletic resources.

E-commerce has dominated the retail landscape, giving customers frictionless and convenient transactions.

But in surveys, what people they value most includes friendly, knowledgeable service.

Consultant Rei Inamoto encourages merchants to think about their interactions with customers as conversations. That’s a new idea that’s been around for a long time: talking–and listening–to customers.