Category: Business

Recently, I was fortunate to have the opportunity to learn a little about  brand loyalty for my job. The results are depressing. Most articles that consider Brand Loyalty forecast its its death. Consumers are increasingly willing to consider a new product or brand, in favor of sticking with a tried-or-true solution. Prior to the internet age, when information was relatively hard to come by, daily items cost more of our income, and brands had regional footprints, brand loyalty made sense. The risks associated with a product change were relatively high.

The internet brought extreme price competition, product availability, and increased information, to the average buyer. A purchaser in Wisconsin can now compare 250 retailers for glass cleaner based on price, average review, or active ingredient without leaving her house. It is now riskier for her to blindly purchase the brand her father used, especially if it is the more expensive option, than to purchase a well-reviewed, cheaper option. Consumers rejoice, brands despair.

Obviously then the answer to the title question is yes, right? Don’t forget Betteridge’s law. I find it more likely that loyalty has shifted to a new entity, rather than decreasing in an absolute fashion. Building on Ben Thompson’s work on Aggregation Theory, I posit that brand loyalty shifted from individual producers to retail aggregators. Aggregation theory focuses on how consumer technology companies that aggregate modularized suppliers — which they often don’t pay for — to consumers/users with whom they have an exclusive relationship at scale changed the profit landscape of retail competition globally.

One lesser explored impact, of a world where aggregators reign supreme, is how consumer trust and loyalty changes with the market shift toward aggregators. In an aggregator-driven market, consumer trust and experience shifts from the product to the marketplace entire. Brand loyalty may shift from the product to the aggregator as well. Consumers frequently choose to buy a more expensive option on Amazon over a cheaper price on eBay due to the differentiated perceived consumer and brand experience. Consumers are loyal to Amazon over eBay, even when the reviews on eBay are more honest and recent improvements in the return policy, and shipping practices bring the purchase process into line with Amazon. I google items using Chrome, I don’t Bing items using Edge; as a consequence Google recommends many of the items I buy. I am loyal to Google, even when its competitors offer better browsers and may recommend better items for purchase. Thompson argues that this loyalty and the market dominance it brings may cement the current tech giants as the preeminent companies of this century.

How does this impact traditional retailers? Brick-and-mortar retail brands that understand the aggregator economy and cultivate a strong brand image, independent of a particular product, are set to succeed in this new economy. After facing revenue loss in 2016, Target outlined a new retail strategy focused on reimagining their stores and building better employee and brand experiences. That strategy is working. The company is thriving in a market destroyed by digital competition.

The portfolio of Urban Outfitters is another successful example of building a brick-and mortar-store that leverages aggregator strategy. The stores within Urban Outfitters umbrella (Urban, Anthropologie, Free People, etc.) each cultivate a list of in-house “brands” making each store resemble a retailer of highly curated clothing from different suppliers. The strategy seems to have insulated Urban Outfitters from online competition; Urban has a strong digital presence and differentiated in-store experience. If Urban appeared to only supply a single house brand, its revenue curve may more closely resemble Gap’s, a primary competitor. The key differentiator of Urban Outfitters, is the strength of store brand perception; consumers are not loyal to any of the individual “brands” that each Urban Outfitters store has.

Traditional retail brick-and-mortar shops were left behind by more than just a shift to cheaper options, and the convenience of online shopping. They missed the boat on building a perception of a differentiated brand, opposed to a brand housing differentiated products (à la Nordstrom). To succeed in a highly competitive industry within the aggregator economy is to build a perception that your store, online or brick-and-mortar, will compile the best options and provide an experience with consumer choice.

In future research, I plan to identify how companies within traditional industries maintain brand loyalty in the internet age. These strategies center around extreme urgency to buy, creating an ecosystem, and creating barriers to switch through incentives.