The Price of Politics: Taking A Stance Impacts Retailers' Bottom Lines with Dr. Marcus Collins of the University of Michigan | Reimagining Retail
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Before we get into that, let's meet today's guest.

Joining me for today's episode, we have two podcast regulars. First up, it's Skye Canaves. Welcome back, Skye. Hey, Sarah. It's great to be back. Great to have you. Also with us, someone we have on the Retail Podcast less frequently, Paola Flores-Marcus. Hey, Paola. Hi, Sarah. Hi, everyone. And also with us is a special guest, author and professor at the Ross School of Business at the University of Michigan, Dr. Marcus Collins. Hi, Marcus. Hi, Sarah.

Hi there. Thanks for having me. Thanks for being here. Go blue. Go blue. All right. It's June, which means it's Pride Month. This year's Pride comes as many companies roll back their DEI efforts. Companies like Amazon, John Deere, Lowe's, and notably Target have made changes to DEI policies that have made headlines.

Before we jump into how that's impacting retail, I want to make sure that we're on the same page here because DEI, diversity, equity, and inclusion can mean a lot of different things. So, Pau, I'm going to put you on the spot here and start with you. What do we mean when we say DEI? I mean…

At its most basic, DEI stands for diversity, equity, and inclusion. But I know we don't have a specific definition for it, and I found it difficult to find anything that's universally accepted. I've always understood it to be an intentional effort on an organization's part to make sure that they're creating an environment that is exactly what it says, right? Diverse, equitable, and inclusive in terms of race, ethnicity, gender, age, disability, anything else. Yeah.

Yeah. Anything to add to that from your perspective, Marcus? I mean, I can only co-sign. I mean, essentially there is meaning and there's intent. Yeah. And to Paul's point, there's an intent that DE&I as an initiative is an effort to drive heterogeneity within the workforce, but also create some parity with regards to their experience, i.e. equity, and ensure that there's access, which inclusion is speaking to. However, though

though that might be the intent, its meaning is just as heterogeneous as diversity is itself. Meaning that there are a lot of different meanings to it. Absolutely. Yeah. I mean, in political discourse, in retail, we have it meaning like a lot of different really squishy things being compared to like the word woke, which also has a lot of squishy definitions.

Let's talk about retail specifically, though. So we've seen these DEI rollbacks. What changed this year when President Trump took office in how retailers were thinking about DEI? And Skye, I'll go to you first for the retail perspective. Sure. So I think there is a very broad, essentially, war on DEI efforts from the Trump administration. They want to banish it not only from the government and public sphere, but

But there have been threats or implied threats against private businesses as well for their DEI programs. And here, we're not talking about the fuzzy values or lip service, but I think more towards the specific programs with goals and objectives.

And some companies in retail had said that they want to, say, have 25 percent people of color in leadership positions or increase women in the boardroom to closer to parity with the general population. So these kinds of programs, I think, have really come under fire and scrutiny and could potentially face some kinds of investigations or challenges from the administration. And that's where I think

retail companies really got spooked about what could happen to them and started to roll back and kind of, you know, follow the administration's line a bit closer in terms of walking back programs and starting to say that they're not going to, you know, feature them as prominently. Now that puts them in a real bind because, of course, for retail and companies in general, you want to

both appeal to a broad base of customers, diversify your audience, but also your internal employment pool very much depend on a diverse workforce. Few companies are going to do themselves any favor by limiting their hiring or positioning themselves as environments that would not welcome a diverse workforce. I mean, I think Sky is spot on. I mean, truly, if we're being totally honest here, the word or the

The phrase DEI signifies anything that's not heterosexual, cisgendered, white, male. Like that has become the orthodoxy. And the change that's happened since Trump took office is that he has taken an ideological approach to a policy that anything that is any semblance of diversity, heterogeneity, equity, parity,

or any inclusion, i.e. access to people who sit outside of the hegemony, then those things are in direct ideological opposition to the administration in every facet of the country, considering the imagination they have of the country. So every institution from business to retail, to government, to education, to social services are now being clouded

in this idea that is antithetical to the intent of DEI. Yeah, actually what we're seeing is the latest iteration of a longstanding battle that they've had like against affirmative action, right? Like this is just the latest version of it. And they'd see DEI as an embodiment of affirmative action to a certain extent. It's just,

a new way, a new framework that they're using. Yeah. But it's been a long standing conversation and like effort, I think. It's just escalated to the point where they're actively using government tools to dismantle it. Yeah. In the interest of like answering the question of like why would a retailer roll back DE&I, there are, I think, retailers that maybe won't be as impacted by rolling back these efforts, maybe because their efforts weren't shoddy.

Explicit. ...things very much. Yeah. But there are either retailers with a conservative shopper or retailers that just have been...

quiet about everything always, that honestly probably won't be impacted or maybe could even benefit from rolling back DEI. But for the most part, the data doesn't support that. According to Pew, 52% of people believe DEI at work is a good thing compared to 21% who don't. And we've seen this in action. Consumer backlash over DEI rollbacks has resulted in Walmart and Target warning investors about these risks.

And in addition to that, 53% of Americans feel disappointed when brands stay out of social conversations entirely, according to Givesley. So there is data that shows that rolling back on this can lead to trouble, as it seems like it has for Target. Absolutely. I mean, Target in particular faces a significant amount of backlash in rolling back its DEI efforts because in many ways, Target was seen as an ally, right?

This seemed like one of us, this seemed like they were invited to the cookout, as some would say. And for them to roll back their DEI efforts because of the pressure they were getting from the administration or the social pressures in general felt like a betrayal. And people said, yo, that is antithetical to everything you said you are about.

But for other retailers, as you mentioned, Sarah, that are sort of prototypically conservative, whether in their stance or their patrons,

it didn't make that big of a deal because like we expect that of you but for target that wasn't what was expected and considering the posture and the kinetics of brands post george floyd there was so much talk about like we're gonna focus on diversity we're gonna be down for the cause and the minute that it became inconvenient

we start to get rollbacks. And that's problematic. And that's why you see the ones who are usually the loudest voice, the one that was the biggest advocate when it was convenient, experienced the biggest blowback when it's not. It's the betrayal. There's a sense of betrayal. That's right. It's poignant that this is happening five years out from when George Floyd was murdered. On the other side of this, we have Costco doubling down on DEI, at least in like

It's publicity efforts, which means that that target consumer, if they are able to, can trade up to Costco or could trade down to a cheaper Walmart product. And that could be a struggle long term. Right. It can be hard to make the direct relationship between the positions and what's happening in stores. But Placer AI, which tracks the foot traffic data in stores, has noted a consecutive four month decline in targets foot traffic data.

For probably every week, while at the same time, Costco has seen increases in its foot traffic. And Costco, of course, has stuck to its previous DEI position and rebuffed attempts to have it, you know, follow suit with Target and other retailers that have shifted their stance.

I mean, the interesting part is that I don't even know if people really know what Costco's DEI efforts are or what their stance are. But the fact that they're being vocal, but the fact that they are standing up when others are folding, it's enough, right? It's almost just the gesture is enough because of what it signifies. That's a really powerful thing. There's a scholar named Ivan Ross.

who would say that people purchase brands of branded products or they consume when things are consistent with or in some way pushes forward their ideal identity project, who they want to be, right? And when a brand is no longer congruent with who I am, consuming from it

or consuming it becomes antithetical to my identity. There's a great cognitive dissonance that happens there. And people go, people either say, I'm going to stop or they find ways to justify it. They go through some cognitive acrobatics to help justify acting in ways that are out of sync with their ideas or their ideologies. And, you know, brands like Target becomes a very, very easy target

Pardon the pun, because there are other options that can help supplement. And I think this actually gets down to like the nitty gritty of it all. And it kind of sucks to hear this is a tough pill to swallow. But in most cases, in most cases, lots of retailers are parity.

But people can't really tell the difference. Yeah. The cost difference aren't that great. One may be more convenient than another, but we're seeing that race to convenience being leveled out. Right. And if one thing is no longer aligned with who I am, the switching cost becomes much, much more affordable. Hmm.

Yeah, and this is, I think, where things like the loyalty and membership programs come into play. Like Costco is a membership retailer that fosters a lot of loyalty from its members because they're paying to be part of Costco. And Target is really trying to ramp up its paid membership program, Target Circle 360, as a path to future growth and turning around a lot of other issues it's been grappling with in addition to its DEI rollback.

And the real challenge is that it's kind of alienated some of its most loyal customers who would be the ones who would pay to be a Target Circle 360 member and now might say, no, your values don't align with mine in this fundamental way. They're not going to pay for it.

the extra added conveniences that Target might offer with its membership. And they're also up against the Walmart Plus and the Amazon Prime. So it's becoming very competitive. Once I think a retailer can get a customer to

kind of buy in to pay for membership, then there are a little more added switching costs that, you know, might keep them with the retailer a little longer. But that loyalty one is a tricky one because loyalty isn't monolithic. There are different forms of loyalty. There's a marketing scholar named Kirstie Nordheim who talks about marketing, talked about loyalty as the three H's.

there is hand loyalty, which is habitual, a thing that we just normally do, right? Like I normally get, uh, the crest, uh,

with the sculpt mouthwash. That's what I normally get. It's just my thing. And I just go, when I go into CVS, I get it because that's what I normally get, right? But the minute that that crest with the sculpt mouthwash is gone, I go, oh man, do you think I'm leaving to go to another retailer to get that sculpt, that crest? No. I'm now saying, all right, what's here now? And in that moment, crest runs the risk of losing me. Yeah.

Right. Because it was only habitual. Then she says, well, then there's head loyalty and head loyalty is this low to where we're constantly buying the thing that we can rationalize because the value propositions are better. Right. I'm buying from this thing because it's cheaper or it has more fluoride in the toothpaste or whatever the case may be. Right. And so long as your toothpaste has more fluoride, I'll continue to pick you. And then the last level of loyalty is the most special and that's heart loyalty. Right.

It's like, I can't explain it. I just love it. I just love it. I love it. That's why I go. I love it. I love it. And if you would have asked me six months ago, which retailers do you love? Target would have been the top of the list.

Right. This is used to be our routine. I take my daughters, Georgia and Ivy, to go to Ivy swim lesson. We go get pancakes after a swim lesson. And then we go over to Target to do some some light shopping. Right. And the kids loved it. Yeah. But post the rollback of Target's DEI commitment.

I was like, yo, I can't do it. It is out of sync with my identity to go to Target. And those first couple of weeks, my daughters were like, yo, we're not going to Target? What's good? What's happening here? Right? And I go, no, let me explain to you why. We haven't stepped foot in a Target since January. Since January. And one would say I was a loyal Target customer. Well, we loved it. And there was habituality there. But because of the head loyalty completely pulled me out of

of that cycle. That's unbelievably powerful. When we think about the ways in which we create golden handcuffs to make it harder to switch to your point sky, when those systems aren't there, it's really easy to lose someone. And this isn't just anecdotal. According to an

adage Harris poll, nearly one in five US adults have stopped using or purchasing from a brand because of its DEI approach being changed. And for Gen Z, that's 40%. We talk a lot about what people claim not being consistent with their behaviors. But I think that we're seeing an actual impact here.

In fact, companies that held firm on DEI commitments saw reputation scores rise by an average of 1.5 points in the Axios Harris Poll 100. Yeah, I think that consistency aspect is super important, right? Like going back to the Costco example, part of the reason Costco is benefiting so much is not just because it offers like a viable alternative to Target, but also because it has a history of being really good on labor issues, has a history of being really good about quality, right? Like the Costco Kirtland brand is like,

for being like standing up to its competitors or whatever it is duping. And then there's like the infamous hot dog incident where it was like. Which like may or may not have happened. I'm going to believe it. I choose to believe it in my heart. Can you say what that is for listeners that might not be familiar with it? Was it someone on the board or maybe one of the owners? It was the founder. The founder of Costco. When someone told them that they were going to raise the price of the hot dog a

combo of a Costco hot dog and a soda for $1.50, the founder said that he would kill him. Which like might be an old wives tale, but like is kind of iconic. I believe it. That is amazing mythology. The folklore. Yes, exactly. Amazing. And like we would say that that is cultural production. Those kind of things are unbelievably powerful. And to your point, they become the receipt. Yes.

That this company is about that life. Yes. So when the winds may blow, these guys are 10 toes down. Costco rises a hero in trying times to save us all. That level of commitment, people go, it's sick.

safe to shop here because it's always going to be congruent with my identity such that I believe this thing. I can rest assured that Costco is always going to stand strong. And in a world where consumption is so conspicuous, where I go, what I eat, where I shop, what I wear, what I do, these things are constantly present in public, in our public social lives, 1000%. Thanks to social networking platforms, of course.

But since so much of our lives are public, that creates more opportunity, more variability to put our confidence in jeopardy. That if I buy the wrong thing, this guy goes, "Ugh, Marcus, why you do that?" And I go, "Oh, I didn't know."

But if I can count on something because they stand the test of time, no matter where the wind blows, they stay plumb. Shoot, that is that that is a great identity project for someone. It's a great strategy for which I'm able to ensure that my actions are aligned with my belief and I don't find myself in cognitive dissonance or run the risk to be to the peril of potential social currency damage.

Yeah, I think it also offsets any other negotiations we might make, right? Because at the end of the day, like we're all constantly negotiating between like our ideals and our survival. So like sometimes we do have to make those concessions and make purchases that we don't completely feel okay with. But if I can make other purchases that kind of offset that, then I feel a little bit more comfortable with the fact that I had to concede on a certain point.

Yeah. That's right.

Why? I mean, I think we have like some suspicions of why this is, but like what what is happening here? They weren't convicted to begin with.

It became a opportunity to ride the zeitgeist, benefit from the zeitgeist in an effort to potentially drive commerce. And the minute it becomes inconvenient to do so, you back away. But not really about that life. And I think that like we constantly see this over and over and over and over again. You project yourself.

conviction, but it's really an act of convenience. And once it's inconvenient, you bend. And I think that like post 2023, after Dylan Mulvaney with Bud Light and then Target got really hit hard because of their pride apparel, like it's been a slow decline since slow the last two years. It's just been quieter and quieter. People are less likely to stick their toes

in the water, especially considering the red waters that run today. Yeah, I think that's a major aspect in terms of like there's a level of unpredictability, I guess. Like we just have never been in a situation where the government has been so forceful in its like scrutiny of these sort of policies, right? And we don't know what tools are going to use to crack down on it if they do decide to double down on that, right? And so I think people are being submissive preemptively, which

which we shouldn't, but. Don't nobody want that smoke. They don't want that smoke. Everybody's dodging it. At least publicly facing. I think internally they still have to, you know, nurture and support their employees and can't really afford to alienate or lose a large number or significant share of employees who are, you know, diverse. The LGBTQ employees, you know, are really everywhere. So I think for companies, they still have to,

they're trying to balance that, you know, publicly saying nothing, but internally providing support. That's the sucky part too, because you hear that. I hear that from clients all the time going, I don't agree with what they're doing. I don't think that's right. But you know, what are you going to do? And I can't help, but think about a song from Destiny's Child. Sure. Say my name, say my name. Yeah.

If nobody's around you, say, baby, I love you. You ain't running games. Say my name. Say it in public. If you love me, if you're about it, say my name in public. Exactly. Exactly. And if you don't, you go, oh, man, you're not really in this with me. You're not really in it. And that sucks. To be an employee in that kind of organization sucks because you're basically parking your identity at the door. But being asked to bring all of you to work sucks.

Come on. Is this a good time to mention or to bring up again what we kind of discussed previously about like the weird sort of

conflicting nature of the corporatization of pride, right? And how like, we are so against like companies kind of getting involved in that because it kind of dilutes it or makes it cheapens or whatever. But at the same time, you want that level of acknowledgement and you want that level of involvement and you want that level of support because it offers a degree of normalcy, right? That it is like something that's not out of

as something that should just be a given, right? That people can just operate in these spaces without being discriminated against. Yeah. And we're seeing about 25% of corporate donors to New York City's pride celebrations canceling or reducing contributions. I want to like zoom back into retail though, because like we can have this conversation about ideals, which is great and we need to have, but like

What happens from here on out? Will people just sort of forget about this and move on? Will this remain in the zeitgeist? I think that even if people sort of forget about these political tones right now and move on, they may still have discovered alternative products that they will then continue to buy. They have new habits. There's new habituation in their consumption. You go, now I'm a Costco guy.

You know, I used to be a Target guy. Now I'm a Costco guy. And, you know, there's a part of the brain called the basal ganglia where habits are constructed and formed and shaped. And you can have a brain damaging incident and the basal ganglia stays intact and you'll still continue to do those habits. Like that's how powerful habituation is. So to this idea of habits,

what happens when we have some elasticity and we snap back to where we were, though the zeitgeist may change, our behaviors may be pretty stuck. And for those retailers, you might be pretty cooked. For a while, at least. For a while. Yeah.

Yeah, like, I don't know. I still have it pretty fresh in my memory when Chick-fil-A was, like, against gay marriage in California and all this other stuff. And I was never a Chick-fil-A major shopper anyway, so I guess I'm not the target audience. But on that principle, I still haven't shopped there. But I have many friends who do, and they're just kind of like, it's fine, whatever. Like...

Like I have gay friends who shop there and they're just like, whatever. I love the food. I'm going to keep doing it anyway. And so I think that there's like, I'm getting a level of distance that comes with it as well. And I don't know, again, negotiations that we make every day. And I think you're absolutely right. And those negotiations don't happen often.

in the individual. They happen in the collective, right? They're negotiating, constructed with our people. They're socially created. And to your point about Chick-fil-A, a retailer in this case, I mean, you're right. Like there was discourse about some things happening with Chick-fil-A, but yet some people were able to normalize. They were able to justify it. And much of that is because there isn't as much parity when it comes to Chick-fil-A's product. That's true. Yeah. They'll make an exception.

Exactly. Exactly. And we do the same thing with Amazon. We go, oh man, I like the way they treat their employees, but I want my dog food tomorrow. So until there's another option that's just as good, that's when we're ruling the flip. Well, we talk about

value a lot on the podcast and we talk about it in comparison to price. Value incorporates a lot of other things beyond price and values are sort of something that gets folded in there as well. Like your social currency also is folded into value. Before we wrap up, I want to talk about

where DEI goes next? Because for all of this like conversation that we've had, as we all know, queer people aren't going anywhere. The values that are associated with DEI aren't necessarily going anywhere, but we're seeing a lot of other language emerging that I think is a safer way of encompassing it. Yeah. You hear words like, you know, we're focusing on togetherness and

and belonging. And those things are even more abstract than DEI itself, right? And as a result, you create sort of this haze that allows you to operate but still be in the confines of the

the social forces that are being pressed upon us based on the current administration that we, that we sit inside. And to me, it's, it sort of feels like, um, instead of saying that we are dating, instead you're saying we're in an entanglement. What are we talking about here? You know, like I think what we need more is exactly situationship. Exactly. It's like, we need in, in a time where we're,

The threat is greatest. We need more specificity, more concreteness than more abstraction. Yeah. I mean, and that is something that retailers that cater to maybe a more conservative client are already doing. They're like Black Rifle Coffee, for example, is like full chested saying what their values are. And that does resonate with their consumer. And then you're sort of seeing some wishy-washiness happening.

on the other side, not universally though, you know, we see Ben and Jerry's trying to cut itself off from Unilever. So, so yeah. I think it's really that mass appeal general retailer or brand that's trying to have as wide a consumer base as possible and really getting, becoming more bland in the process.

And we see on the other side, on the more progressive side, smaller indie brands that speak directly to their customers and stick with their values. A big one is Elf Beauty. They've been a champion of DEI and a lot of other brands.

social causes and they stick to that and they're very vocal about that. And that's a large brand, but I think we see a lot of niche brands that are able to more directly interact with their consumer without fear of reprisal on a mass scale. Yeah. Marcus, you work with Elf, right? Yeah. So I'm really close to the folks at Elf and you're right. They are 10 toes down their belief. And

And I think that, you know, the literature really supports this too. This idea of like mass scale, let's like stick to the middle, you know, the average consumer, the average American. But an average doesn't exist. An average is a mean of extremes. Yeah.

it is the worst strategy ever because those people are practicing a risk aversion strategy that is they're not going to be the first to buy the first to download the first to watch diverse to visit diverse to eat they're not going to do anything first they're going to look to see what everyone else does before they do anything so trying to appeal to those people is like it's erroneous it's a flawed approach the people who are most likely to move are the people who believe

And those people then enter the discourse on your behalf to convince the people that are less likely to move. I'm far more likely to trust you, Sarah, than I am to trust an ad that I see. But your conviction and our relationship is more likely to convince me than anything else because culture moves forward on the basis of one simple question. Do people like me do something like this? This is what Seth Godin constantly preaches.

Do people like me do something like this? It doesn't happen in the advertising. It happens between people, the negotiation process and the advertising becomes the manner in which we justify our stance. Yeah. I don't know if we're going to get a more specific takeaway to end on than that quote from Marcus appealing to the average is the worst strategy ever. Any final thoughts before we wrap up?

Yeah, I think once again, I said this in the article a couple weeks ago and I said, I'll say it again, like backtracking on your stance is worse than taking a stance. Okay, like backtracking your stance means that you don't stand for anything and then you've alienated the people who are already on your side and you have not gained anyone new because they don't already don't identify with you. So like, don't do that. Yeah.

Or if you do that, apologize. Don't do it. Just don't do it. That's right. That's right. Great. Well, thank you so much for being here. Thank you, Sky. Thanks for having me back. Thank you, Paola. Thank you so much. This was fun. And thank you so much, Marcus. It was a pleasure to have you. I'm super grateful. Thank you. Thank you to our listeners and to our team that edits the podcast who all make me feel a sense of belonging.

please leave a comment or review and remember to subscribe to Behind the Numbers. We'll be back next Wednesday with another episode of Reimagining Retail. And on Friday, join not Marcus Collins, but Marcus Johnson for another episode of Behind the Numbers, an e-marketer podcast made possible by SYNT.