Staying True To Brand Identity Isn’t Easy

By Jim Prevor, Editor-in-Chief, Produce Business

Sometimes data points deceive.

When considering inflation, economists typically remove from their calculations food prices and other highly volatile items in an attempt to estimate a “core” inflation. If fresh produce prices rise or fall, it typically has more to do with weather and crop conditions than any fundamental change in produce prices.

When surveys claim things such as that 43 percent of shoppers are buying less food, yet there is no evidence this is so in volume sales at retailers, and when there is a supposed boom at farmer’s markets, CSAs, etc., it is more interesting to think about why consumers would say such a thing in a survey than to think about it as if it were true.

And when certain low-cost retailers boom, it may indicate less of a flight to low cost retailing than a shift in market share from a giant such as Wal-Mart, which has lost its way, to competitive formats.

It is also true that sometimes one has to do things to survive in the short term that severely damages a business in the long term. Deep recessions are commonly one of those times. Retail is a business with lots of fixed costs. A 10 percent drop in sales is a catastrophe for most retailers.

If one is an upscale retailer at a moment in time when upscale is either unsustainable for many consumers because of their own financial setbacks or at a time when upscale goes out of fashion perhaps because it is deemed showy, one is faced with a difficult conundrum. If one stays true to one’s brand and image, one will probably sustain short-term losses. Now perhaps, being true to one’s brand may also pay off in the long term — though, as famed economist Lord Keynes pointed out, “In the long run, we are all dead.” To put it another way, the question often is whether a company has the financial wherewithal to stay the course or if it needs to improvise in the hope of living to fight another day.

It is important to remember that Whole Foods was forced to raise new capital in the midst of the financial crisis and Great Recession. If it had been unable to raise funds, its future was very uncertain.

Wal-Mart has been gradually surrendering its low price leader reputation. Why it is doing this is unclear. Perhaps the Walton family of today is different from Sam’s family and it is now pushing for the company to maintain profits so it can maintain dividends.

Imagine a dramatic announcement that Wal-Mart was going to suspend its dividend and reinvest that money in price reductions. Imagine that every quarter Wal-Mart pledged to reduce its profit margin to provide better value for consumers. Imagine Wal-Mart announcing that its goal was for every quarter’s profit growth to be less than sales growth. Such gestures, both marketing, and substance, might well help Wal-Mart reestablish its low-cost reputation. In the long run, that would be of inestimable value.

Dollar stores are booming, but it is not obvious that consumers suddenly want to shop at smaller stores. Although the recession may have created some real estate opportunities in better locations, the big issue is that Wal-Mart is no longer the low price leader. No amount of marketing will succeed in obscuring that fact.

We would not agree that Wal-Mart is refocused on its low-price strategic position. It is focused on marketing gimmicks to make people think Wal-Mart is low price, not actually being the low price leader.

Look at Wal-Mart’s Christmas price match program. It just promises to match prices, not beat them. It only matches print ad prices, thus allowing stores to undersell Wal-Mart with impunity as long as they don’t run print ads. Then it doesn’t give people their money back, just a Wal-Mart gift card. It is not a sincere effort to beat everyone on price; it is marketing fluff. Wal-Mart knows what prices its competitors are selling at. It should not allow itself to be undersold in the first place — but that would impact margins.

This is really the issue. Everyone can be true to his or her brand values if it doesn’t cost short term money. Only really exceptional companies manage to commit to a brand image and pay the short term price so as to succeed in the long term. Upscale firms mess up their image by implying they are cheap. Value-oriented marketers mess up their image by promoting things that aren’t so — the lowest price.

Shifts in the economy matter, but typically brand meaning can’t shift on a dime, so being true to one’s brand makes a lot of sense. But impatience is easy to summon when money is being lost.