Shop­pers fret amid takeovers of brands

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - ANNE D’INNOCENZIO

NEW YORK — Some shop­pers are fret­ting about big com­pa­nies they don’t like tak­ing over their fa­vorite brands.

The lat­est: Ama­zon’s move to pur­chase Whole Foods has spurred wor­ries about a de­cline in qual­ity and eth­i­cal stan­dards, or that the store will be­come like other su­per­mar­kets. Wal-Mart’s pur­chase of cloth­ing la­bels ModCloth and Bono­bos has shop­pers anx­ious that the world’s largest re­tailer will cheapen the qual­ity of the clothes, some vow­ing not to buy the brand again be­cause they don’t want to sup­port Wal-Mart.

For big com­pa­nies, the chal­lenge is al­ways ex­pand­ing the reach of a beloved niche brand with­out alien­at­ing its core cus­tomers. Of the re­cent deals, that’s a bigger job for Wal-Mart, since its rep­u­ta­tion is more about low prices than trendy fash­ion — and shop­pers might not view the world’s largest re­tailer very pos­i­tively.

“Bye bye Bono­bos,” T.D. Arken­berg wrote on Twit­ter. “I’ll miss you. You were a great brand. But as Sears de­stroyed Lands’ End, Wal­mart will de­stroy Bono­bos!”

Arken­berg, of Ar­ling­ton Heights, Ill., has five pairs of Bono­bos pants and loves the way they fit. He planned to buy more, but now says he’ll shop more at Nord­strom and small bou­tiques. Arken­berg be­lieves Wal-Mart puts cost­cut­ting ahead of work­ers.

“In my mind, Wal-Mart’s par­tic­i­pa­tion of the brand will cheapen it,” he said in an in­ter­view.

Re­tail his­tory is full of big com­pa­nies tak­ing over smaller la­bels, with mixed re­sults. Cos­metic giant Es­tee Lauder kept the ir­rev­er­ent spirit of MAC Cos­met­ics when it bought the re­main­ing stake of the up­start makeup brand in 1998. And when Mar­riott In­ter­na­tional pur­chased the swank Ritz-Carl­ton chain that same year, it found suc­cess be­cause it took a hand­soff ap­proach, says Allen Adam­son, founder of the firm Brand Sim­ple Con­sult­ing.

But plenty of cases didn’t turn out so well, as Arken­berg noted. Sears Hold­ings Corp. pur­chased sporty out­door chain Lands’ End in

2002, but sales de­te­ri­o­rated be­fore Sears spun it back off in 2014. Ce­real giant Kel­logg Co. bought Kashi in 2000 as it sought to get into the or­ganic food mar­ket. But sales of Kashi tum­bled af­ter Kel­logg stopped let­ting Kashi run its busi­ness in­de­pen­dently.

Arken­berg is also wor­ried about his lo­cal Mar­i­ano’s gro­cery store chang­ing for the worse now that its parent com­pany is owned by Kroger Co., the na­tion’s sec­ond-largest food re­tailer. He hasn’t seen any neg­a­tive im­pact so far — but is watch­ful.

“There is a level of dis­trust among big in­sti­tu­tions,” said Wendy Lieb­mann, CEO of con­sult­ing firm WSL Strate­gic Re­tail. “So there’s a very del­i­cate bal­ance for big com­pa­nies to con­tinue to sup­port [the la­bel] and let it grow, and tak­ing costs out of it to make it more ef­fi­cient.”

Joan Walsh, a Whole Foods cus­tomer from Seat­tle, is con­cerned that Ama­zon could ruin the shop­ping ex­pe­ri­ence at her fa­vorite store.

“I re­ally like Whole Foods for its qual­ity, cus­tomer ser­vice, and also its prox­im­ity to my home and the fact they have all nat­u­ral in­gre­di­ents, non-GMO prod­ucts,” said Walsh. “I just worry that Ama­zon will re­ally de­grade the kind of cus­tomer ser­vice and qual­ity I’m ac­cus­tomed to.”

Nei­ther Ama­zon nor Whole Foods has said much about what they plan. They have said, though, that they don’t in­tend to change Whole Foods’ stan­dards, which in­clude a ban on ar­ti­fi­cial in­gre­di­ents. And Wal-Mart says it’s keep­ing the sta­ble of on­line brands it has bought up, in­clud­ing ModCloth and Bono­bos, in­de­pen­dent. It says they won’t be sold in Wal-Mart stores — only through Jet.com, which Wal-Mart ac­quired last year.

Andy Dunn, co-founder and CEO of Bono­bos, said that when news of the pos­si­ble deal leaked two months ago, it

gave him a chance to test the re­ac­tion. And he found that cus­tomer growth ac­tu­ally ac­cel­er­ated.

But Dunn con­cedes there’s work to be done in ap­peas­ing what he calls a dis­sat­is­fied mi­nor­ity who are loud on so­cial me­dia. He says some shop­pers don’t un­der­stand that Wal-Mart is a dif­fer­ent com­pany than it was in the past, and he plans to be a “mouth­piece” to trum­pet the com­pany’s moves to in­crease pay for work­ers and its en­vi­ron­men­tal ef­forts.

“We need to help them re­think the Wal-Mart they thought they knew,” he said. Be­ing owned by Wal-Mart will im­prove lo­gis­tics like faster ship­ping, he said, and promised that the qual­ity and ser­vice will be at least the same.

While Wal-Mart and Bono­bos likely had lit­tle over­lap in cus­tomers, Ama­zon and Whole Foods do. More than 60 per­cent of Whole Foods shop­pers are mem­bers of Ama­zon Prime, and more than 25 per­cent of Whole Foods cus­tomers al­ready buy some gro­ceries on Ama­zon, says con­sumer re­search firm Magid.

Whole Foods’ most loyal shop­pers were fairly neg­a­tive about the deal, with al­most 43 per­cent say­ing they thought

it was a bad idea, ac­cord­ing to a sur­vey of more than 2,000 shop­pers con­ducted by re­search firm Glob­alData Re­tail af­ter the pur­chase was an­nounced. Most of the con­cerns cen­tered on a pos­si­ble change in food qual­ity or the com­pany’s eth­i­cal stan­dards, the re­port said, and just over half fear the deal might mean Whole Foods be­comes like “any other gro­cer.”

“The find­ing un­der­lines the fact Ama­zon will have to tread care­fully as it makes changes at Whole Foods,” wrote Neil Saun­ders, man­ag­ing di­rec­tor of re­tail at Glob­alData.

Smaller com­pa­nies see op­por­tu­ni­ties in those con­cerns. Take Gun­nar Lovelace, the co-founder of on­line re­tailer Thrive Mar­ket, which aims to make non-per­ish­able or­ganic food and non-GMO prod­ucts more widely af­ford­able. Lovelace be­lieves he’ll ben­e­fit from shop­pers wor­ried about Ama­zon tak­ing over even more of their shop­ping ex­pe­ri­ence.

“Con­sumers are so so­phis­ti­cated they can smell the phoni­ness,” he said, “and that plays to our van­tage point.”

AP/BEBETO MATTHEWS

A man walks by the Bono­bos Guideshop in New York’s Fi­nan­cial Dis­trict in March.

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