Cross Category Trends
1. Mom, I married a machine
Steve Jobs famously talked of technology being a bicycle. It was a thing that took you places. Today, Americans are integrating technology more and more into their lives not mere to go places but to do just about everything. The explosion in popularity of smart speakers like Amazon Echo and Google Home devices only underscores this. Thirty two percent of broadband households in 2018 had a smart device in their homes, while 50 percent said they planned on having one. Many people ask Alexa for the news and now get their traffic news and direction from AI-enabled services like Waze. They are turning to technology to find love, order a ride, learn how to make a soufflé, and get the answers to life’s most burning questions.
If the Top 100 rankings show anything, it’s that brands that ride the wave and bring their services closer via technology come out on top. Domino’s, for example, has become the top pizza chain in brand value, likely because of its digitally enabled services. Uber Eats has grown explosively, as people forgo the hassle of going out to eat, and instead order anything they want and have it delivered. As the country moves forward and 5G technology brings massive new bandwidth to devices, those that lean in to AI and IoT will likely benefit from a consumer who is more and more looking to technology to smooth out the rough places in their lives.
2. I shop, therefore I am
In an era defined by fake news and occasionally violent political interactions, American brands increasingly find themselves dragged into the fray. Amazon, for example, holds the unique distinction of facing criticism not only from Trump, but also from his political opposite, left wing firebrand Bernie Sanders. And more and more brands are taking stands against political policies they feel are distasteful, including Starbucks’ pledge to hire refugees.
That’s because American shopping patterns are often a statement about who a person is and what he or she values. Buyers will happily pay three times more for a banana at Whole Foods which is identical to one found at Walmart.
But shopping as identity is not just snobbery (though that is certainly a component of it). Consumers are also interested in brands that are launched with a moral compass—whether that’s Hobby Lobby and Chick-fil-a, which are strongly Christian brands, or brands that forgo profits to embrace the environment, like Patagonia.
This only makes sense. In the Instagram era, a lot of consumer choice depends on optics and how a purchase makes a person look. More and more consumers are rewarding brands not merely for making great products, but sharing their values, with 89 percent saying that they are loyal to brands that share their beliefs. To that end, Nike made a calculated and highly successful bet that promoting controversial quarterback Colin Kaepernick, who has led protests against police killings of young black men, would be good for sales.
3. The United States of Amazonia
By one estimation, half of American households today are connected to Amazon Prime. The brand has grown explosively in recent years, relentlessly expanding its reach into everything from smart speakers to physical stores—and if it continues is massive rate of growth in brand value, it will overtake current kingpins Apple and Google in the coming years for the #1 spot.
Part of the reason is that Amazon has profoundly changed how brands and people interact. Consumers first fell in love with the simplicity and convenience of ordering products through Amazon, as well as enjoying the numerous other benefits of the service, including sizeable discounts at retailer Whole Foods. They are now responding warmly to Amazon’s Alexa technology, which first debuted in Echo devices but will soon embrace everything from cars to home appliances.
Amazon’s popularity is helping some brands, hurting others, but affecting nearly all. Pharmacy brands saw drops in their stock prices after Amazon’s entry into that market. Others have embraced selling their products on Amazon, even retailers like Kohl’s and J. Crew. And many brands, like Nike, are betting heavily on direct-to-consumer channels, scooping up its own data and trying to beat Amazon at its own game. But no one is immune. Even if you sell B2B, you’re still selling to a person whose expectations for convenience and speed are being shaped by Amazon.
4. Meet me—just not in the middle
The last week of every month in most of the United States, a dormant local advertising market springs into life with deals on everything from meat to processed foods.
The reason is that at the beginning of every month, states refill Electronic Bank Transfer (EBT) cards. EBT cards are the physical manifestation of the Supplemental Nutritional Assistance Program, or SNAP, which reaches 42 million Americans, giving them on average $126 dollars per month. This pumps roughly $5.3 billion into the economy at the beginning of every month, the great majority of which is immediately spent on food and packaged goods. Staple brands like Honey Maid and Jimmy Dean greatly over index on EBT purchases.
For some brands, EBT is not a political or moral question. It’s increasingly becoming an existential one. Wealthy consumers (14.7 percent of US households earn more than $150,000 per year) are flocking to new, organic, “healthy” brands, and lower end consumers are buying generic. Brands like Campbells and Kraft Macaroni and Cheese fighting to preserve market share and hope for a reversal of the economic and demographic situation.
These brands have plenty of runway, of course, but some may want to rethink their traditional retail strategies. Where they have traditionally rewarded the American consumer for buying more, purpose-driven brands might consider the consequences of punishing with a de facto “poor tax” those who can’t afford to stock up.
5. Segmentation and its discontents
Say the word “Costco” and a picture of Jay Gatsby hardly crosses your mind. But his modern equivalent may shop there, as wealthy people are among the brand’s best customers. Imagine an ocean cruise (Americans account for a whopping 11% of the global cruise market), and you’d likely be surprised to know that a third of the people taking them have a household income under $80,000.
Marketers once lived in a cozy world that could be neatly divided along demographic lines. If a person was high income, you could sell them a Jaguar, a Bulgari watch, and a bottle of Châteauneuf-du-Pape. If they were middle income with kids, you could bombard them with cereal ads and reap the whirlwind.
Perhaps it was never this simple, but if data has taught us anything about shoppers, it’s that they don’t break down this way. After all, 70 percent of Americans think they’re middle class, including a large number who are upper class. Their purchasing patterns can be highly idiosyncratic—eager to pay a premium for some goods, but perfectly willing to stay down market for others. Many will save up by shopping at The Dollar Store for the chance to enjoy a magical three days at Disney World. Other justify purchasing expensive rotomolded coolers by Yeti, with the idea of passing them on to their kids. But across a broad spectrum of products, consumers are both looking for deals—and for ways to go premium too.
6. Bridging the urban/suburban/rural divide
Americans are moving back to cities, increasing their populations at a 3.4% rate. Who is moving? Young people. Rural areas roughly have a median age of 43, which drops to 36 for urban areas. They are also more affluent, more likely to be socially liberal, and much more digitally enabled. Only 3% of the people living in urban areas lack access to high speed internet connections, and they live in a landscape nearly as digitized as urban China.
In fact, those who live in major urban areas like New York or Chicago often have access to services more likely found in Paris or Singapore than in their own suburbs. They can start their days using digital currency at a Starbucks, get lunch by texting Peach, and have products delivered in as little as two hours via Amazon Now. They have access to bike and car sharing services as well as shared workplaces. Less noted is that the government services they access are often digitally enabled to a surprising degree. Los Angeles probably leads the way with a data portal that includes 529 different resources, including where to find the nearest city trash bin.
All of this is creating a highly demanding urban consumer who expects perfection in digital services—and often gets it. Marketers often are part of their ranks, but they would do well to realize that a great many people in the country live differently than they do. In the suburbs, technology adoption is slower and more selective. In rural areas, some people live much as they did before the Internet. This digital divide fuels a cultural divide (people in rural areas overwhelmingly feel misunderstood by their urban counterparts). It also has important consequences for marketers, who need to build strong brands not merely in the dizzying world of urban life, but in the country, where people still buy Pop Tarts, bottled water, and digital devices in large numbers.
7. The giant tapeworm on the economy
If you want to look where America is not great again, it’s the healthcare system. The US has an inefficient and disorganized system that’s so expensive that many reasonably affluent people will put off a visit to the doctor until they’re sure they need one. Poorer people may well put off one until they’re taken to the emergency room. This creates a vicious cycle in which costs continue to rise, while access to care continues to decline. In the past two years, life expectancy in the US has declined.
Fixing it all would require political unanimity and will, two things that are on incredibly short supply in the US. The last attempt was the Affordable Care Act, which created state-level exchanges and banned a number of harmful practices, such declining coverage due to preexisting conditions. The Trump administration waged a losing battle against the measure, however, as many congressmen in his party ironically come from the states that most benefit the most from it.
The major way this affects brands was best described by famed investor Warren Buffet: it is a “tapeworm” on the economy. The high cost of care is leaving Americans with less and less disposable income and a de facto decrease in standard of living. This causes them to buy less and be more selective in the things they do buy. In response, Buffett’s Berkshire Hathaway has partnered with J. P. Morgan and Amazon to find ways to improve care for their employees—and perhaps beyond. Time to wish them luck.