The CQ: When Brands' Inclusive Gestures Don't Feel Sincere
Retailers must thoughtfully consider consumer identity...not exploit it.
‘Tis That Time of Year
June is an important month for a lot of people with both LGBTQ+ Pride Month and Juneteenth, which commemorates the emancipation of enslaved African-Americans. In a world that seems to be opening up ever so slightly, the fervor in celebrating identity feels like a mounting groundswell and a tide of zealous positivity.
However, unfortunately, some companies inevitably emerge with new merchandise, promotions, and branding that seem geared toward profiting off specific communities that hold tremendous spending power. The month has barely started and we’ve already seen examples of cultural appropriation and co-opting in the name of capitalism. Over the past couple years, brands have launched things like limited edition equitable skincare, Juneteenth ice cream, Black History candles, and tone-deaf Pride merchandise—all of which has prompted swift backlash. This sampling provides a painful lesson in what not to do when acknowledging identity. With proper execution, products, platforms, and services can become empowering, where the journey to self-actualization is supported–not exploited–by brands.
Leaders must ask themselves: How can one hope to honor such an important occasion like Juneteenth without muddying the message? How can one build a product that serves rather than alienates a particular community? The answer is nuanced, but in a previous post, we noted that some of the most successful affinity-focused brands tend to serve one or two of the following circumstances:
Biologically-rooted differences justify the need for a unique offering or product.
Unequal consideration and inequality at an institutional level require dedicated overcorrection in favor of the underprivileged group.
In keeping with those two points as a North Star, companies can ensure that their offerings align with the needs of their audience, and do so authentically. Companies leading the charge in this manner include A-Frame, which is building personal care brands to meet the needs of America’s shifting demographics, as well as Waeve and Naza; Kinly, a financial services platform designed to close the wealth gap for Black Americans; Daylight, a digital banking platform designed for the LGBTQ+ community; and others.
Further, if brands truly want to make an impact across different communities and identities, there are ways to show up when it matters, not just when there’s a dollar to be made. These moments in time can be powerful celebrations of often marginalized groups—let’s do it the right way.
This Week’s Top Consumer Insights
New data suggests 36% of Americans making $250,000+ are living paycheck to paycheck following the recent surge in inflation.
With 80% of Americans planning to trim the excess of their spending amid inflation, retailers are taking note and shifting strategies—running ads highlighting value vs. trends, stocking more staples, and discounting certain items to move inventory.
More restaurants are adding line items like “kitchen appreciation,” “fuel surcharge,” and “temporary inflation fee” to bills in order to better offset their costs during the economic downturn.
There’s a home ownership gap between Black and white households. Black Americans have a 44.7% rate of homeownership compared to 74% among white households, according to U.S. Census Bureau data.
Women in the labor force have nearly recovered to pre-pandemic levels, with almost 77% in the workforce and number of women workers aged 25-54 hitting 49M. The number of Black Americans participating in the workforce also reached a 17-year high in May.
Gen Z wants to see brands live their values. A new Retail Brew/Harris Poll shows 52% of Gen Z consumers are more likely to shop at stores that will help employees gain abortion access, followed millennials (41%), Gen X (28%) and then Boomers (25%).
Walmart seeks to challenge Amazon’s e-commerce dominance by thinking of its 4,700 stores as “shoppable fulfillment centers.”
Elon Musk suggests Tesla employees need to either work 40 hours per week in office or turn in their resignation in a sign all companies are not bending to worker demands for flexible or hybrid arrangements.
Are we finally entering the era of the robotaxi? The California Public Utilities Commission issues Cruise a permit to charge for autonomous rides San Francisco, becoming “the first and only company to operate a commercial, driverless ride-hail service in a major U.S. city.” The fleet will be able to operate on select streets from 10PM to 6AM, driving no more than 30mph.
Working from home has altered how we work—period. Meet the six pandemic worker archetypes that have emerged over the past two years.
✨ Ask Forerunner ✨
Q: "Why is physical retail and ‘experiential retail’ so hard to find VC funding for? I’ve seen many bootstrapped companies with great growth curves / growth history, a unique value proposition, and a captivated, die-hard customer base; plus these are usually easily-scalable businesses in an industry ripe for disruption. In another industry like tech, investors would be clamoring for these investment opportunities, why is retail a taboo investment choice for VC’s?"
A: There’s lots to like about physical retail—especially the brand moment and utility it affords consumers. But the capital-intensity and linear growth trajectory (driven by a relative lack of cost leverage compared to digital models) can make it tough to underwrite to 10-100X+, venture-like outcomes. For example, a great physical retail store might take $500K to steadily deliver $1M in annual sales and $250K in profit. The next five stores might [formulaically] cost another $2.5M to build all-in, steadily delivering $5M sales and $1.25M in profit annually across the 5 stores…but without much incremental leverage with each door. Meanwhile, with a digital storefront, there’s a greater opportunity to efficiently bend the growth curve. One store can scale to an infinite number of customers, with more leverage in fixed and variable costs (e.g. technology, marketing, customer service).
All that said, there are physical-retail models commanding VC dollars while meeting breakout-growth expectations—and the common thread is unlocks on scalability. Think about the integration of e-commerce/out-of-store sales (e.g., Foxtrot), smaller-footprint models delivering more with less (e.g. Studs, Blank Street), and combining physical retail with other modes of engagement to drive a growth flywheel, like events or digital media (e.g., CAMP, Neighborhood Goods).
If you’re flipping the retail model on its head, we’d love to hear about it.
—Nicole Johnson, Partner
Have your own question for a Forerunner investor or founder? Click here to ask it. The best questions will be answered in future editions of The CQ.
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