BRAND FALLOUT
Retail giant Macy's Inc. dumped billionaire Donald Trump and his men's clothing line last month, after his inflammatory remarks about Mexican immigrants.
Retail giant Macy's Inc. dumped billionaire Donald Trump and his men's clothing line last month, after his inflammatory remarks about Mexican immigrants.
Other national retailers say Trump's negative commentary continues to reverberate throughout the retail industry.
Apple Vacations, a national travel agency, last Friday canceled a major event at a Trump hotel in Chicago that was scheduled for September. And last week Perfumania, which licensed the Trump name for fragrances, dropped him. Earlier this month, Serta, which licensed Trump's name for mattresses, ended its business relationship with the real estate mogul.
The long list of companies that have severed business ties with Trump has refocused attention on the sometimes tenuous relationship between a brand and its values, and a high-profile pitchman who falls out of line in the public eye.
"The notion of 'even bad publicity is better than no publicity' - that idea is wrong in this day and age where consumer vigilantism on social media rules the day," said Americus Reed, a professor at the Wharton School at the University of Pennsylvania who teaches corporate brand identity. "Brands have less time to assess whether they are on track for a brand crisis because information acceleration is so fast. So they have to act fast before the critical threshold snowballs out of control."
Trump's remarks on illegal immigration came during his announcement that he was running for the GOP nomination for president.
"The U.S. has become a dumping ground for everybody else's problems," he said on June 16. ". . . When Mexico sends its people, they're not sending their best. They're not sending you. They're sending people that have lots of problems, and they're bringing those problems with us. They're bringing drugs. They're bringing crime. They're rapists. And some, I assume, are good people."
Companies like Macy's realized the Hispanic population was too big (55 million according to the 2014 U.S. Census) and its spending power too vast ($1.5 trillion, up 50 percent from 2010) to risk alienating them. Also, Hispanics tend to be younger when compared with other groups, which some retail experts say carries consumer implications. The average age for Hispanics is somewhere around 27, whereas for Asian Americans it's around 36.
As Trump angers Hispanics, for months retailers have been courting them. Last September, CVS, one of the nation's largest pharmacy retailers, acquired Miami-based Navarro Discount Pharmacy, the largest Hispanic-owned drugstore chain in the U.S.
Meanwhile, Macy's parted ways with Trump on June 30, saying his remarks were "inconsistent with Macy's values." Trump had appeared in TV commercials for Macy's around Christmas with its other celebrity retail partners.
"Macy's is a company that stands for diversity and inclusion," the retailer said in a statement. "We have no tolerance for discrimination in any form."
Trump's inflammatory remarks came at a particularly sensitive time for Macy's. In the last year, it has invested heavily in marketing to Latinos. It launched a new clothing line with Mexican superstar singer/actress Thalia, and the company has a Spanish-language TV commercial featuring her.
"The principle is that an organization's reputation is built on how it matches or exceeds the expectations of its stakeholders," said Nir Kossovsky, CEO of Steel City Re, a leading company adviser on managing brand reputational risks. "Those stakeholders can include customers, employees, suppliers, creditors, regulators, investors, and the various nongovernment organizations that make a company's business their business.
"When expectations are not met, these stakeholders can become disengaged, disinterested and distrustful," Kossovsky said. "Each of these 'disses' can destroy [brand] value and come at a cost."
Being looked at as a serious Republican presidential candidate "is dangerous for brands, especially like Macy's, that don't need to cloud what their brand stands for by mixing it with a lot of what may be extremely polarizing political rhetoric," Reed said.
Angelo Carusone, executive vice president of nonprofit Media Matters, who led a petition drive that urged Macy's to cut ties with Trump, called the decision "vindicating."
"The Hispanic demographic's prodigious and rapidly increasing purchasing power, coupled with the facts that they are comparatively young, social media savvy, and energized means that any business that dismisses - or worse yet - antagonizes this community does so at their own detriment," Carusone said.