Retail Unwrapped from The Robin Report

Tariff Chaos and the Widening Gyre

Mark Cohen — Tue, 24 Feb 2026 05:01:00 +0000

The U.S. Supreme Court’s ruling against Donald Trump’s unilateral imposition of worldwide tariffs should have been a slam dunk. The peculiar delay in the Court’s ruling was allegedly caused by a struggle between ideology and the integrity of the Constitution itself among the justices. Nevertheless, Trump’s “America First” April 2025 “Liberation Day” strategy, emboldened by repeated escalations, changes, and curiously granted exemptions, has now been deemed to be illegal by our highest court.

What does this ruling now mean for the myriads of trade deals this government has allegedly struck with countries around the world? I say “allegedly” because few if any of these agreements have actually been codified. Many, in fact, are based upon future promises of purchases of U.S.-made products and investment in U.S. enterprises that may be specious at best. After the ruling, Trump immediately engaged in a characteristic tirade, accusing the Court of all manner of impropriety and then immediately decreed, despite the Court’s ruling, that he would impose a 10 percent tariff on all U.S. imports across the board. Less than 24 hours later, he amended that decree to 15 percent.

How will retail be affected by the new tariff ruling? And the answer is: The industry will continue to experience more chaos and uncertainty resulting from the recent Supreme Court ruling. A retail CEO walks into their boardroom this week and, without a doubt, asks of his or her executive team, “What now?”

Based on his reaction to the Court’s ruling and his continuing bombastic criticism, it appears that Trump and his advisors presumed that the Supreme Court wouldn’t rein him in nor would the current majority party in Congress, which, by virtue of the U.S. Constitution, holds the only legal authority to impose tariffs. Despite the Court’s decision, he continues to falsely claim that tariffs have not been paid by U.S. consumers, the U.S. economy is booming, inflation is under control, and U.S. manufacturing activity is rising as a result of his tariff-driven actions. Unfortunately, his administration’s own recent statistics refute these claims – something he and his team are unwilling to accept. Underlying all of this, it’s also clear that Trump assumed that the world would bend a knee to his trade demands, something that has not occurred, given evidence of all manner of retaliatory actions taken by a host of trading partners.

So, how does a business leader who may have just breathed a sigh of post-Covid-19 relief in early 2026, now confronted by more confusion from the newly-illegal “Liberation Day” program, proceed? Business executives, both CEO’s and owners of small, medium, large and overlarge enterprises have always faced the vagaries of uncertain futures driven by rising inflation, rising interest rates, ever-changing consumer preferences, competitive challenges, etc. But these issues now all pale in the face of Trump’s ongoing incomprehensible and now illegal trade behavior. Unfortunately, this Supreme Court ruling does nothing to ameliorate the uncertainties that arise from Trump’s ongoing tariff program.

Next Steps

New questions to be resolved:

Will the U.S. Treasury refund the billions of dollars of tariffs that have been collected?
Will consumers and other stakeholders, who have borne an estimated 90 percent of these tariffs, demand and receive some form of recompense?
Will the “deals” Trump struck over the past 10 months remain in place?
Will his declaration of new replacement tariffs even hold?

What a Leader Can Do: A Practical Playbook

The legal authority for these new tariffs is written to allow for a duration of 150 days pending further legislative action. What should retailers do before these five-month actions expire?

Conservatize your sales forecasts and plans.

For businesses currently doing well, be very careful about line-extending current success. Similarly, for businesses currently struggling, be very careful about depending on turnaround assumptions currently in hand. Wherever prices must be increased, be very realistic about the possible negative effects on demand.

Conservatize your gross margin and expense plans as well as your profitability forecasts.

Where you cannot or choose not to raise consumer prices, be very realistic as to what effect that will have on gross margins and then on profitability. The tariff effect has to come from somewhere. If not the supplier or the customer, then where? Operating expenses will be more challenging than they normally are. Everything from service, supply and logistics costs, materials costs, labor and benefits expenses and energy costs will be subject to ongoing and unpredictable price inflation. Yes, the Big Beautiful Tax Bill will provide some offsets, but not nearly enough to cover the uncertainty that I believe businesses will face.

Solidify your relationships with all your stakeholders.

Suppliers: The integrity of your assortments relies upon the relationships you have with your suppliers, all of whom will face the same planning conundrum as you. Focus on your most important vendor partners and manage your relationships with them to a fault.

Customers: Your customers will inevitably continue to exhibit crises of personal liquidity driven by the ongoing inflated prices of goods and services, inflated housing costs and the burden of increasingly expensive child and healthcare. It is really important, now more than ever, to reach out to your most loyal and reliable customers to reassure them that you take their life challenges and continued patronage very seriously. Where you can, advise them in advance of upcoming price increases and changes in customer-facing policies such as shipping costs, returns restrictions and/or changes in hours of operations.

Associates: The viability of a company is always integrally linked to the relationship the company has with its workforce. This is especially true during stressful times, and now certainly fits that bill. Protect the employment of your most valuable team members from the shop floor up to those in corner suites. Unfortunately, this calls for limited hiring if not outright hiring freezes. The best way to avoid necessary reductions in force is to avoid inflating your labor force in the first place. Note, for many businesses, their Covid-19 hiring hangover is just now reconciling itself.

Shareholders: How to manage shareholder expectations is a constant “rock and hard place” issue. If you engage in inappropriate short-term actions to prop up your company’s performance, there will inevitably be a longer-term price paid. This is almost as irrefutable as Isaac Newton’s law of gravity. Having said that, you must protect the performance, if not the solvency, of your enterprise. My advice, admittedly now, from the sidelines, is to level with your shareholders as to the nature and details of the uncertainties you face.

Competition: Business performance, particularly during periods of adversity, is often characterized as a zero-sum game. Winners win by virtue of their ability to take business away from the competition. If ever there was a good time to size up a competitor’s weaknesses and capitalize on them, that time would be now.

Be wary of technology.

Do not view AI-based technology as a panacea during what I believe might be an unprecedented period of turmoil. Yes, increased use of new technology is vital and necessary, but only hand in glove with the use of common sense and good judgment in decision-making. Fear of missing out (FOMO) is something to be examined and managed carefully.

Use the lessons of the recent past.

The 2020-2024 Covid pandemic experience created a textbook of lessons learned for business. In the face of the adversities largely driven by uncertainties that we may be confronted with again, use your company’s past successes and failures as guideposts for the next several years while, hopefully, America regains its footing on the world’s stage.

Anticipate the November 2026 mid-term election

This consequential election may represent an inflection point, as will the 2028 presidential election. But, as it is impossible to foretell conditions and outcomes between now and then, as always, hope for the best but prepare for the worst.

Retailers Should Be Wary of Trade School Grads

Mikelya Fournier — Wed, 11 Feb 2026 05:01:00 +0000

This is a true story. I am a veteran of the dysfunctional retail beauty training business. It’s not technically a scandal, but it’s a signal. This report isn’t just a complaint (well, sort of). I’m pulling back the curtain in an honest attempt to level up the profession and ensure that, ultimately customers walk away without any regrets. That starts with well-trained graduates who have experience in real-life situations, taught by working professionals who share their knowledge.

What’s a subtle reason retailers face so many returns? And the answer is: dysfunctional educational and trade school training.

A Cautionary Tale

I earned my beauty license after decades of working in natural hair. After nine grueling months of what felt like an endless pregnancy and then transitioning into the retail space, I found a disturbing disconnect between the classroom and performance on a retail sales floor. This is an industry-wide problem. If you ask any local retail manager, they’ll probably tell you they’re retraining new hires from scratch while eating the costs of avoidable returns. And that’s if the retailer still has a training program, which is another story, but at the root of the customer/sales associate disconnect. Bottom line: We should be concerned about how our sales associates and beauticians are being trained.

As a customer, walk into almost any beauty retailer, be it salon or anywhere else, and odds are you’ll leave with the wrong foundation shade, hair services that disappoint, and a skincare routine that misses the mark for your actual skin issue. As much as retail would like to make this a people problem, there’s no denying it’s very much an infrastructure problem. In short, the way we train beauty talent doesn’t match the way beauty is being sold or how consumers want to purchase it.

On the Big Stage

In the U.S. alone, the hair salon industry generates an estimated $60 billion in annual revenue. And a big chunk of this revenue engine is decided by the customer in front of the checkout counter. And that’s before you even get into what clients spend online maintaining results at home.

On the product side, the global professional hair-care channel is projected to be around $23.5 billion in 2025 worldwide. This includes products being moved through professional recommendations. The most notable powerhouses with the biggest portfolios are the ones that shape the industry because they’re the ones funding training and securing prime product placements on shelves. We’re talking L’Oréal, Paul Mitchell, Estée Lauder Companies (Aveda), and the likes.

Meanwhile, shiny new players like Olaplex and amika have entered this newer era where shoppers expect more than “this smells good and feels nice.” Olaplex set a standard by making haircare feel almost clinical with their exclusive product mechanisms and haircare routines. amika brought a whimsical spin on haircare but didn’t compromise on quality and community building. But all that momentum still collapses if associates can’t translate products into the right recommendation for a real face, scalp, or hair texture.

Retailers Feel the Pinch

Achieving desired personal beauty is, by definition, intimate. Retailers like Sephora or even the brands in most department stores lack a private space for personal consultation. These services are performed on the floor amidst the distractions of store traffic and demanding shoppers. Consumers already have high expectations when it comes to complexion accuracy and routine curation, and it’s so sad that too many customers are still walking out of the store with products that don’t align with their wants or needs.

Then, you have hybrid model retailers who promote the “store plus salon model” where there’s a solid educational backbone. But that doesn’t solve the problem of new beauty pros who hit the floor lacking in brand fluency. For example, in professional retail stores, associates at CosmoProf and Sally’s are often undertrained on the science of beauty—what works for which texture, tone, or regimen. To be blunt, what retailers fail to realize is that the counter is only as good as the training behind it.

Training Camps

Education has mostly moved online and on demand to teach standardized hair and beauty theory. Retailers and brand houses are also building supportive educational infrastructure internally. In a recent SEC filing, Ulta cited an education program that serves nearly 7,500 salon professionals, while Coty built an internal “Coty Campus” to upskill 11,000 employees. These initiatives are admirable. But where things fall short is the lack of post-secondary ongoing coursework that includes curriculum on retail sales or even how to work with the products that are in big box beauty retailers. In the beauty business, lifelong learning and frequent product updates are table stakes.

Excellent training isn’t cheap. Compared to a typical four-year college education ($100,000-$264,000), or two-year technical training ($10,000 -$30,000), trade school training is affordable. According to legacy beauty educator Milady, a typical U.S. cosmetology program runs around $16,000, including tuition, kit, and licensing.

Cosmetology programs are often underfunded, so when budgets are stretched, schools ration products and students are rationed on practice. In the long run, retailers are hurt because students show up to the workforce unprepared to properly service customers who eventually return products. As a reminder, processing a return can cost up to 59 percent of an item’s original price, which is a constant headache for retailers across the board.

The government is getting involved. The Gainful Employment rule directly ties federal aid to employment outcomes. Starting in 2026, students who enroll in an academic program that leaves them as graduates with debt they can’t afford will have to sign a disclosure notice. This new federal rule aims to provide families with more information about the costs and risks associated with programs. This means that educational programs that chronically deliver high debt and low earnings risk losing eligibility. Whether you love the policy or hate it, it’s forcing schools, brands, and retailers alike to tighten their investment alignment between training and real job results.

The Irrelevant Classroom

In beauty school, you get required reading, tests, and hands-on practice. That’s it! I never met brand reps from big beauty brands or learned about the products sold in stores. I had to research product information and experiment on my own, which was costly. My experience was not unique. The lack of real-life case studies, use cases, and professional experts as visiting teachers is a common practice.

Originally, I planned to use my license to offer more services at my salon, but then I pivoted to test my skills by working at a salon in a major beauty retailer. Here’s what I noticed, and these lessons can be generalized to other training education/programs, which should give any retail leader pause.

Board prep is more important than job readiness. Most programs teach licensure requirements, which emphasize safety, sanitation, and basic technique. Even during the middle of my studies, I was forced to sign a paper that stripped me of a cosmetology diploma (never mind the money I paid for core curriculum courses) and replaced it with a “certificate for licensure.” Aside from the switch-pitch credentials, the training was out of touch with the real world. What is not taught are on-site skills. Employees need to be speedy, adept at good consultations, and have retail smarts. New grads often struggle with building routines, picking the right product for the customer, or finishing a service on time. This leads to longer appointments, fewer product sales, and inconsistent services in the retail environment.
Too many gaps in product fluency. I was never taught about specific product lines in school. Our inventory was random, nonexistent, or watered down. Can you imagine bleaching someone’s hair and realizing you have no toners? Learning how products work together was not in the curriculum. As a result, on the retail floor, graduates don’t know how to deal with different textures, finishes, or shade systems. It’s hard to be loyal to brands or make good recommendations without prior experience with said brands. Retailers feel the impact of this immediately. Workers who don’t look at beauty as an ecosystem and don’t suggest related products for upsells, result in customers returning purchases due to dissatisfaction.
Tight budgets limit hands-on practice. In my case, paying $800 for a toolkit of shears, a razor, rollers, perm rods, a blow dryer, a flat iron, and three mannequin heads for one year was crazy. I also ran out of materials halfway through the course and had to buy more. There was a lack of real-life professionals who could demonstrate faster styling techniques and makeup shade matching. Training for completing a sales routine was missing, which is so integral for being an asset to a retailer.
Drastically underdeveloped soft skills. Soft skills aren’t part of a state board exam. Inclusive consultations? Expectation setting? Service recovery? Empathy? These skills are treated as optional, but when you break into retail, they are most certainly non-negotiable. These skills are at the heart of building trust with customers; they reduce buyer’s remorse and protect store margins.

What’s the Fix?
For starters, any school curriculum has to be closely aligned with real retail tasks. Brand-backed product modules and tracking practice hours tied to actual product assortments should be requisite. Assessing soft skills alongside technical ones is critical.

Programs that teach the consult, the match, and the close while measuring accuracy and speed will produce graduates who are truly ready for the sales floor. Retail needs graduates who can perform on day one. Until training mirrors the realities of the sales floor, there’s a serious disconnect.

My solution is to make school look like the retail floor, then measure outcomes the same way retailers do.

Tie curriculum directly to product use. If you want confident recommendations, train on the actual product assortments graduates will use in stores. Plug brand academies and retailer modules into required coursework (complexion mapping, curl systems, scalp health) and verify competency with short assessments.
Build “workforce labs” that connect the classroom to the counter. Co-create cohort rotations with nearby schools inside select stores where students can complete live consults, timed services, and real shade-matching under staff supervision. This could serve as a candidate qualifying tool by tying hiring to lab performance versus only conducting interviews.
Lower the cost of practice. It would certainly help to underwrite student kits with tiered brand sponsorships and retailer grants. To track progress, require utilization reporting so the products and tools turn into practice hours.

Postscript

I came to school with 20-plus years in natural haircare. I expected to add precision cutting, color theory, and a retail-ready consult. Instead, I was immersed in a system designed to pass a test. This isn’t an indictment against instructors; it’s about aligning programs that mirror real life.

I think the beauty industry sees education as charity, not a way to help retail success. When new beauty pros know products and are confident in consults, sales go up, and returns go down. We have the technology, the programs, and the pressure from government regulations. So, what’s the issue? If schools, stores, and services align, retailers will see profits rise.

Retail in 2026 Faces Political Headwinds — But Not a Freefall

Arick Wierson — Tue, 06 Jan 2026 05:01:00 +0000

I’m often asked to provide a macroeconomic and political read to foreign leaders, tech CEOs, and increasingly, retail executives trying to make sense of what comes next. Here’s what I’m telling retail leaders right now: I’m cautiously optimistic about 2026.

That may surprise some, because the economy certainly isn’t “fixed.” From a fundamentals-only perspective, many indicators are moving in the wrong direction. Growth is uneven. Inflation pressures linger. Structural issues remain unresolved. Tariffs continue to muddy the waters…

But fundamentals aren’t the only force shaping retail outcomes. Consumer confidence is. And 2026 is an election year — a period when perception often moves faster than policy, and sentiment shifts before the math does.

If I were sitting in the CEO chair at a major retailer — whether a mass merchant like Macy’s or Target, or a discretionary-driven specialty brand — I wouldn’t be betting on a boom. But I also wouldn’t be bracing for collapse.

If I were sitting in the CEO chair at a major retailer — whether a mass merchant like Macy’s or Target, or a discretionary-driven specialty brand — I wouldn’t be betting on a boom. But I also wouldn’t be bracing for collapse.

Here’s why. As the political cycle intensifies, incumbents historically lean on familiar tools aimed at stabilizing voter sentiment: talk of tax relief, targeted spending, and efforts to ease financial conditions. Whether those measures solve underlying economic challenges is a longer-term question. But in the near term, they shape how consumers feel. And consumers don’t shop based on spreadsheets. They shop based on confidence.

Do they feel secure in their jobs?
Do they feel the next six to twelve months will be manageable?
Do they feel momentum is turning in their favor?

That emotional calculus matters enormously in retail.

At the same time, global events continue to inject volatility into headlines. Venezuela remains a live issue — not because it offers an immediate solution to global energy prices, but because its political transition introduces fresh uncertainty into already fragile energy markets. With Nicolás Maduro now out, expectations that Venezuelan oil will quickly return and push prices down are overly simplistic.

In reality, political transitions in resource-heavy countries are rarely clean or fast. Infrastructure is degraded. Contracts are contested. Sanctions frameworks take time to unwind. Internal power struggles can delay production for months, if not years. In the near term, that uncertainty may actually add upward pressure to oil prices, not relieve it. Markets tend to price risk before they price supply.

That said, political narratives don’t require immediate results to influence consumer psychology. Even the promise of normalization or future energy stability can shape sentiment — especially when reinforced by domestic economic easing. For retail, that distinction matters. Energy prices may not fall meaningfully in the short run, but confidence can still rise if consumers believe conditions are stabilizing.

Historically, even heightened geopolitical tension can produce short-term sentiment effects at home — not because outcomes are resolved, but because visibility and messaging create a temporary sense of direction. These effects are often fleeting. But in retail, timing matters.

When you layer that sentiment lift — however modest — on top of domestic economic signaling, you create a window where perception outpaces reality. That doesn’t eliminate inflation. It doesn’t remove structural risk. And it certainly doesn’t guarantee growth.

But it does suggest resilience. And in retail, resilience is often the difference between hesitation and conversion. So, when retail leaders ask me about 2026, my answer isn’t hype or gloom. It’s cautious optimism — paired with a clear reminder:

Be ready to act if consumer confidence improves, regardless of whatever picture the economic data is painting. Because when consumers feel better — even briefly — retail performance often follows faster than the macro data would suggest.

When the Checkout Aisle Becomes a Ballot Box

Arick Wierson — Thu, 11 Dec 2025 05:01:00 +0000

For years, retailers comforted themselves with the idea that they sat above politics — neutral, objective and safely focused on price points and planograms. That era is finished. Today, the checkout aisle has become a de facto ballot box, and retailers are being drafted, sometimes willingly, sometimes unwittingly, but usually kicking and screaming, into political tensions shaped not only by consumers and media but by political leaders themselves.

Americans fed up with this nation’s political dynamic tend to brush off this uniquely American bug in the system, but the truth is that this same story is unfolding globally, from Johannesburg to São Paulo, as much as it is appearing in cities like Memphis and Minneapolis. And it’s no longer just about whether brands accidentally stumble into political controversy. Increasingly, national leaders are actively trying to pull companies into their narrative, their agenda, or their fight. Retailers used to fear bad press. Now they have to fear becoming props in political theater.

Political leaders pull retailers into their orbit because brands are visible and relatable in a way that institutions and policies are not. And that makes retailers uniquely vulnerable to being pulled into national conversations they never intended to join.

South Africa: When the President Calls You Out by Name

In South Africa, President Cyril Ramaphosa recently demonstrated just how directly leaders can rope retailers into political storylines. In a recent “weekly letter to the nation,” a platform usually reserved for matters of state, Ramaphosa singled out the country’s “Big Five” grocery chains: Shoprite, SPAR, Pick n Pay, Woolworths and Massmart. His message wasn’t subtle. Food inflation is high. Millions are food insecure. And grocers, he argued, “must play a far greater role” in keeping nutritious food affordable.

Ramaphosa framed food pricing not as economics, but as a moral obligation — and he positioned retailers as central players in his Government of National Unity’s mission to fight hunger. He even pointed to cartel-like behavior and “rocket and feather” pricing patterns documented by the Competition Commission, suggesting that grocers respond suspiciously fast to rising costs but suspiciously slowly when those costs fall.

This was neither media scrutiny nor activist criticism; it was pressure originating from the president himself: overt, intentional, and explicitly political. For retailers entering or operating in South Africa, the lesson here was clear: You aren’t just selling goods or groceries. You’re stepping into a political arena where the president himself may call you out to advance a broader narrative about justice, inequality or state performance.

Brazil: Where Standing for Something Means Being Pulled Into Something

In Brazil, political polarization doesn’t just draw retailers in — it demands that they take a position, whether they want to or not. Over the past decade, retail brands have been pressured to voice values on race, diversity, LGBTQIA+ rights and gender representation. This isn’t just consumer activism. Brazilian political leaders and public institutions have waded into the fray in ways that make corporate neutrality close to impossible.

Retail giant Magazine Luiza’s decision to restrict its trainee program to Black and mixed-race applicants didn’t just trigger consumer debate; it triggered lawsuits, federal scrutiny and a national argument about who gets access to opportunity. Political figures seized the moment to score cultural points.

Similarly, when brands like Skol (a leading popular beer) and Mercado Livre (a major ecommerce retailer) embraced highly visible diversity and Pride campaigns, politicians on the right blasted them as pushing “ideology,” while leaders on the left held them up as models of modern Brazil.

In Brazil, politicians treat brands as cultural players, sometimes praising them as agents of progress, sometimes attacking them as symbols of decadence — but always using them. For global retailers expanding into Brazil, it’s not enough to understand consumers. You must understand how your brand could become a tool, or a target, in the hands of political actors.

China: When the Government Decides Your Prices Are a Political Issue

China, as always, has its own distinct version of retail politicization, but the theme is similar. There, it’s not about cultural values. It’s about economic control. When Chinese ecommerce players like JD.com, Meituan and Alibaba escalated their “instant retail” price war, regulators stepped in aggressively, warning that extreme discounting could worsen deflation and hurt the national economy. Top economic officials framed the issue not as corporate strategy, but as a matter of state interest and summoned the companies to pledge cooperation. Pricing decisions effectively became matters of political concern, and retailers found themselves positioned as instruments within the government’s broader narrative about economic stability, growth, and national resilience.

The U.S.: Not the Exception, Just Another Front in the Same Global Battle

Americans often assume that the collision between politics and retail is something uniquely homegrown, a byproduct of our culture wars, boycotts, and social media firestorms. But when you zoom out from the domestic drama and place the U.S. alongside South Africa, Brazil and China, it becomes clear that America is simply experiencing its own local version of an international trend. Political leaders in the U.S. have discovered the same thing their counterparts abroad have realized: Retail brands are powerful cultural symbols, easy to weaponize, and emotionally familiar to voters.

So, when American politicians publicly berate a retailer, call for a boycott, or cast a company as either a champion or villain of “real America,” it isn’t radically different from Ramaphosa invoking grocery chains to frame the struggle against food insecurity, Brazilian politicians using brands to argue about identity and modernity, or Chinese regulators transforming pricing decisions into matters of national stability.

The U.S. is just another venue where political leaders have figured out how to weaponize retailers for their own narratives. And it’s anyone’s guess whether America is exporting this impulse or simply channeling the global mood. What matters is that the phenomenon isn’t American at all; it’s universal. And companies that believe they can escape it by hopping across borders will quickly learn that retail politics travel well.

Retailers as Political Pawns

Seen across markets, a clear pattern is emerging. Retailers have become politically useful surfaces, canvases onto which leaders project narratives about fairness, identity, opportunity, inflation, modernity, nationalism or economic anxiety. It is not about the products; it is about what leaders can get the products to represent. Once a retailer becomes shorthand for a national issue, its business decisions stop being viewed as commercial choices and start being interpreted as political signals.

In places like Brazil and South Africa, this dynamic hinges on representation and inequality. In China, it revolves around economic control and price stability. In the U.S., it plays out through partisan identity battles. But the underlying mechanism is the same everywhere: political leaders pull retailers into their orbit because brands are visible and relatable in a way that institutions and policies are not. And it’s not confined to these markets. Across Asia, similar pressures emerge as governments use retail as a proxy for economic credibility. Throughout Europe, where cultural politics have become increasingly explosive, brands are routinely drawn into debates over national identity and social cohesion. And in Latin America, what happens in Brazil is echoed in countries like Argentina, Mexico and Colombia, where retail serves as a stage for negotiating everything from inflation to inclusion. Companies become proxies. Their logos become symbols. Retailers’ decisions become victims of political pressure.

For global retailers, the implications are profound. Political neutrality is no longer something that can be assumed; it has to be actively managed. Companies operating in multiple markets must develop a far more sophisticated understanding of local political currents and cultural flashpoints. A merchandising choice, hiring initiative, price adjustment or even a logo refresh can carry different political meanings depending on the country, the moment, and the leader looking for a narrative to amplify. Without real local expertise — people who can map the political terrain, anticipate how a decision might be interpreted, and steer the organization away from avoidable crossfire — retailers risk being blindsided again and again.

Ultimately, what these examples from around the globe show us is that retail has become one of the most convenient stages for political storytelling. Brands are familiar. Stores are unavoidable. Almost everyone has a relationship with them. And that makes retailers uniquely vulnerable to being pulled into national conversations they never intended to join. Political leaders understand the value of invoking a brand’s name at precisely the moment it helps them drive home a point.

Retailers can no longer pretend that “Aisle 5” is apolitical. It isn’t. And whether a company is selling groceries, cosmetics, furniture or fast food, someone in power may decide it’s useful to say that company’s name out loud. Once they do, the business becomes part of the story — whether it ever meant to be or not.

Off the Shelf with Phil Lempert: Oreo & Reese’s – Really, Another Oreo?

Phil Lempert — Tue, 02 Sep 2025 04:01:00 +0000

What I’m seeing in the snack aisle right now is absolutely fascinating and really weird. Two of America’s biggest snack rivals just did something that would have been unthinkable. Oreo and Reese’s — owned by completely different companies — are joining forces.

Mondelēz’s Oreo and Hershey’s Reese’s are launching not one, but TWO collaboration products this fall. And yes, it’s yet another marketing gimmick and brand manager doing yet another Oreo line extension to add to the over 85 (count ‘em) flavors of Oreos! The companies say they are watching social media — TikTokers, opening up Oreo cookies and slathering them with Reese’s peanut butter cups. But really?

But here’s what’s really happening behind the scenes. It’s a perfect storm: Both companies are struggling. Mondelēz just reported a 3.5 percent drop in North American sales. Hershey’s hiking prices because cocoa costs are through the roof, thanks to tariffs. And consumers are cutting back on impulse treats. Maybe it’s time to stop these Hail Mary idiotic brand extensions to boost sales and just focus on the core product? Or, hey, what about a healthier Oreo?

American Eagle’s Sydney Sweeney Ad Spawns a Culture War

Jasmine Glasheen — Wed, 06 Aug 2025 04:01:00 +0000

American Eagle’s recent attempt at cheekiness is being judged as tone deaf at best. Some are even interpreting it as pro-Eugenics messaging. Which makes sense, considering that the AE ad featured the blonde-haired, buxom, blue-eyed Sydney Sweeney talking about how great her “jeans” are while sprawled not-so-innocently across a couch. The entire Sweeney campaign hinged on this genes/jeans pun.

Perhaps the oddest thing about this campaign is the weaponized incompetence of those behind it. While weaponized white incompetence surrounding racial issues is nothing new, an entire company demonstrating this in an ad toting white beauty ideals at a time when marginalized communities are under attack?

In an era of heightened consumer scrutiny and a contentious global political climate, American Eagle’s Sweeney campaign is a warning for retailers trying to manufacture relevance without cultural context. Let’s talk about why consumers are so fired up about it, touch on why comparisons to Brooke Shields’ CK ad fall short, and what this means for future retail advertising.

The American Eagle disaster proves that retailers can no longer afford to confuse stock market performance with DEI awareness. Not in an era when customers dissect corporate messaging, then build communities around it on social media. The Sweeney ad demonstrates what happens when a company’s entire chain of command neglects to question the implications of what they’re putting out in the world, or how that messaging fits into the global climate.

A Big Win?

American Eagle was transparent that getting Sweeney to sign on for the ad campaign was a big win. In fact, the first few LinkedIn posts about the ad were the people behind it celebrating its “cheeky” humor. They even launched a “Sweeney” jean to raise awareness for survivors of domestic violence. AE’s marketing team thought the campaign was just subversive enough to resonate. yet seemed blind to its implications. As was Wall Street when it first met with the triumphant press release announcing the campaign’s launch.

The “good jeans” tagline was included in the press release. But evidently, nobody behind the scenes on AE’s marketing team, HR team, or its Wall Street investors felt empowered enough to call it out before it was subjected to consumers.

It’s clear that investors thought they’d get the Swift Effect with Sweeney’s ad campaign. Initially, it looked like they got it –American Eagle’s stock boomed by 10 percent after announcing the ad, adding about $200 million to the group’s value. And then Adweek reported that American Eagle stock hit a 25-year high after Trump endorsed the Sydney Sweeney ad.

In truth, Sweeney’s ad is reminiscent of the dark ages of American Apparel and Abercrombie & Fitch. It smacks of the shameless sexualization of women that American Apparel had in its heyday; however, American Apparel got away with it because of the diverse models in the ads. The AE ads are more in line with Abercrombie & Fitch’s past edification of wealthy, white heterosexuals.

As we all know by now, the AE ad features Sweeney saying, “Genes are passed down from parents to offspring, often determining traits like hair color, personality and even eye color.” She then says, “My jeans are blue,” referring to both Sydney’s blue eyes and the denim she wears in the video. Sydney’s blue eyes are elevated as a beauty ideal, which feels like a conscious departure from past AE ads celebrating diverse bodies. They really didn’t think the generation that invented the colloquial use of the word “cringe” would take umbrage?

DEI Retreat & The Cost of Nostalgia

A diverse and empowered HR department, marketing team, or Wall Street investors worth their salt would’ve caught the implications of the Sweeney ad, but it didn’t happen. That this ad was allowed to drop speaks not only of the cultural incompetence of American Eagle’s C-suite, but also of the lack of power given to diverse members of their team who would have caught it. And quite possibly it was the star power behind the irreverent agency that created the ad, Ryan Reynolds.

A customer on AE’s Instagram said, “Would love to hear how many POC were involved in the creation and implementation of this campaign.” American Eagle quickly followed Sweeney’s ad with a series of new ads depicting models of color, but the follow-up has also been criticized for its knee jerk reaction and namelessly “celebrating” the diverse models.

For many, the professed innocence of Sweeney’s ad doesn’t stack up to the facts. Conservative media pundits were calling out Sydney’s endowments, as seen on SNL, an “anti-woke triumph” before she ever signed on with American Eagle. A huge departure from the body-inclusive Aerie line, the campaign could only be aimed at the 37 percent of Gen Z men who feel that “America is on the right track.” As if to cement this assertion, the White House called the discourse around the ad “moronic” and “cancel culture run amok.”

Not a Brooke Shields Wannabe

The Sweeney kerfuffle has historical echoes, and many are likening it to the infamous 1980 Calvin Klein ad featuring Brooke Shields. In the ad, the then fifteen-year-old Shields whistled at the floor, then stared seductively at the camera, saying, “Do you know what comes between me and my Calvins? Nothing.” Implying that she was freeballing it to consumers across the nation.

While Sweeney’s ad campaign certainly exhibits overt sexualization of women (the ad pans to her chest and a smiling Sydney scolds it with a “Hey, eyes up here”), Sydney Sweeney is an adult. Brooke Shields was a child. It’s the difference between the overt sexualization of children and championing a singular, whitewashed beauty ideal that smacks of eugenics when marginalized groups are struggling. That’s unique to 2025, and that’s what next gens won’t soon forgive.

The Future of Retail Is Culture Consciousness

The American Eagle disaster proves that retailers can no longer afford to confuse stock market performance with DEI awareness. Not in an era when customers dissect corporate messaging, then build communities around it on social media. The Sweeney ad demonstrates what happens when a company’s entire chain of command refuses to question the implications of what they’re putting out in the world, or how that messaging fits into the global climate. No matter how many diversity panels a company holds or how much they invest in positive messaging, trainwrecks like this reveal who’s really in the room when decisions are made…and whose voices still aren’t being heard.

Unofficial American Eagle reps have since addressed the backlash from the Sweeney ad. “This is yet another example of how social media is just not reflective of real life,” an American Eagle rep told TMZ on July 30. “The absurd response from some corners of the internet is absolutely not reflective of how American Eagle’s customers feel.” They went on to say that their “independent polling” found that 71 percent of respondents thought the commercial was appealing. “The bottom line,” they continued, “is that this was about creating a great pair of jeans and supporting a very worthy cause through some of the proceeds going to domestic violence prevention. Anything beyond that is noise that is not registering with the average person.”

If you felt your stomach sink when the term “average person” was used in connection with the Sweeney ad, you aren’t alone. Nor would you be alone in cringing that AE rolled out an Instagram ad featuring a nameless woman of color after the Sydney montage took over their page. The last-minute nod to domestic violence awareness in Sweeney’s campaign makes it even harder to take, given that domestic violence disproportionately affects the marginalized communities the ad ignores. Anyone still doubting that DEI is worth the investment, consider this: AE’s $68 million operating loss, the cost of the Sweeney ad, and the estimated costs of AE’s new crisis PR firm. American Eagle’s fallout is a cautionary tale for retailers, reminding us that cleverness without consciousness always comes at a cost.

Work from Home – Privilege or Imperative?

Mark Cohen — Tue, 28 Jan 2025 05:01:00 +0000

As the pandemic has abated over the past several years, a pseudo-debate has emerged throughout many companies as to whether “working from home” policies should continue. I say a “pseudo-debate” because many employees believe that they have a consequential voice and vote in the matter. Like it or not they do not.

When all is said and done, remote work and remote interaction proved workable to a degree during the throes of Covid, but it is hardly optimal where interaction between individuals and teams is necessary.

Pragmatic Decisions

In reality, a decision to continue to support remote work from home vs. a mandated return to the office is one that must be made by the leadership of an enterprise based, cold-bloodedly, upon what is necessary for the overall health and well-being of the business. It is a decision which must be well thought out and influenced by the opinions of all of those principally affected. But when all is said and done it is likely to be a binary decision that will not be applauded by many. At the end of the day, leadership’s mandate must be to protect its business’s viability.

Working to Live

It stands to reason why many employees have embraced working from home. Flexibility in lifestyle, personal scheduling freedoms, avoidance of commuting time and expense, and for some, an opportunity to relocate to a more appealing location– all reasons for many to want to be allowed to continue to work from home.

I’m on the board of a tech company that moved into a brand-new and spacious office facility in 2019 but like most headquarter operations had to revert to remote work once Covid 19 reared its ugly head. The company, which had always had some element of remote team activity, mastered the challenges that WFH required to the extent that it is now operating mostly remotely as a matter of permanent governance.

While this pandemic-driven accommodation has worked well for some companies who have now embraced remote work permanently, or have moved company facilities to more favorable locations, it apparently doesn’t work for most.

Change of Venue

As we’ve seen from an unending string of announcements, staged and then complete return to the office mandates have abounded. Over the past several years, while teaching at Columbia’s Business School, I was repeatedly asked by students what my position would be if I were still CEO of a company regarding WFH. My reply was always the same, notably, if I thought WFH was a nonstarter I would have begun to wean the organization off WFH over a defined period leading up to a non-negotiable return to the office date. I definitely would take that position if I thought that the organization could not be successful in acceding to the understandable but unworkable preference of many in the organization’s workforce.

Some students, concerned about the career decisions they would face upon graduation, would often pose the question, “What if a company’s most talented associates refuse to come back to the office?” My answer was always the same. If I thought a return to the office mandate was necessary, I would sever those unwilling to comply, wish them well, and then move on. Yes, there would be some period of upheaval and disruption, but then life would go on. This tough love message is accompanying more and more corporate announcements today.

Team Sports

Remote work and interaction proved workable to a degree during the throes of Covid, but it is hardly optimal where interaction between individuals and teams is necessary. At Columbia, I taught via Zoom for several years during the pandemic but could never align with the view of some that this practice should continue. Before joining Columbia, I was responsible for many large retail organizations throughout a 30-year career in that industry. I would never have deemed remote work for most central activities to be viable. This is because of the interactive and interdependent nature of merchandising, assortment planning, marketing, product development and sourcing that are the lifeblood of a retailer or brand.

Finally, to my students, I would describe the very real value to them of seeing the inter-workings of a company from the management’s position. In terms of seeking career advancement, I often said that if you are dead set on a work-from-home lifestyle, then look for a job as another face on Zoom working for a company that’s okay with that. If, however, you are devoted to significant future career opportunities within a complex organization, stop complaining and get back to the office.

DEI: Courageous Efforts or Cowardly Responses?

Mark Cohen — Wed, 22 Jan 2025 05:01:00 +0000

Editor’s Note: This is the second part of a two-article point-counterpoint series on recent retail decisions about DEI. We are presenting two different views to explore the many facets of this polarizing issue.

Most, if not virtually all, consumer-facing businesses, whether small, medium, large or overlarge, do business with diverse groups of customers. Diverse by virtue of race, color, religion, ethnicity, lifestyle, sexual orientation and political leanings. Most consumer-facing businesses also employ similarly diverse groups of associates and suppliers. Diversity is an American societal reality; thus, diversity brings with it an intimate link to issues of equity and inclusiveness.

My issue here is not to challenge the importance of DEI’s underlying principles, but to criticize how some consumer-facing organizations have tried to use DEI as a marketing message, and then, as some, have cowardly turned tail in the face of targeted right-wing threats.

If you have a problem with the concept and reality of diversity and its inherent connection to equity and inclusion, then you might want to stop reading this article.

Institutionalized DEI

I think that any broad-based enterprise led by accomplished, intelligent and thoughtful leaders must recognize and support DEI issues. Unfortunately, shining a bright light on these issues exposes companies to the biases, prejudices and in some cases, like it or not, downright racism, that is out there among us. The question then, is not whether an enterprise should support DEI principles but rather whether, or to what degree, it should outwardly communicate its intentions rather than just practice them.

George Floyd’s murder by a Minneapolis policeman accelerated an understandably nationwide outpouring of outrage and concern. The idea then of “DEI” as a necessary organizational imperative became widespread. DEI mandates were written, DEI committees within companies were formed, and in some cases, DEI executives were elevated to C-Suite status.

Unfortunately, some of these efforts can easily be described as more “knee-jerk” than substantive. In fact, at the Columbia Business School where I was teaching at that time a Vice Dean position for DEI was created. The position was occupied by a Vice Dean and senior faculty member, who prior to that appointment had curiously moved to create a faculty lounge that sought to exclude all non-tenured or tenure-track faculty. (Note, the majority of courses at Columbia’s Business School are taught by non-tenured faculty.) Faculty were compelled to attend DEI meetings and were asked to “write down” instances where they had observed Black staff being treated badly, a well-intended but completely foolish question as Columbia’s Business School employed almost no Black staff.

DEI In-Store

Target has repeatedly been guilty of publicly facing overreach over the years, first in the company’s support for transgender bathrooms, then more recently, its over-the-top assortment of LBGTQ merchandise in support of Pride Week. Target allegedly suffered substantial losses of volume in both cases due to customer backlash. In the face of customer pushback and widespread media coverage, Target hastily deemphasized the Pride Week assortments it had presented.

Walmart also carried LBGTQ merchandise in support of Pride Week but did so in a more reasonable and measured way. Walmart stayed out of the transgender bathroom issue (in my view correctly), leaving the issue to the government. But then Walmart hopped on the DEI bandwagon and when threatened, uncharacteristically did a 180-degree turn. The DEI efforts that Tractor Supply publicly mounted were also abruptly reversed when threatened. It’s not surprising when one considers Tractor Supply’s customer base as likely mostly conservative, rural and semi-rural. Pissing off a substantial number of your customers, like or not, is not a winning strategy. Who else has recently reversed course? The Ford Motor Company, whose long-standing best-selling vehicle is the F-150 pickup truck. It’s easy to assume what the cultural bias might be for many if not most, hardcore pickup truck owners.

DEI in the Cross Hairs

My issue here is not to challenge the importance of DEI’s underlying principles but to criticize how some consumer-facing organizations have tried to use DEI as a marketing message, and then others have cowardly turned tail in the face of targeted activist threats.

So, now the spotlight is on Costco. The third-largest U.S. retailer, Costco has always practiced good governance with regard to DEI issues since the company was founded. There was no breast-beating as others did when DEI became “a thing.” Their Board has rejected the recent demand that they “study” the impact of DEI practices on the company’s performance and wisely presented the matter to the company’s shareholders for a proxy vote later this month. I believe Costco’s management is correct in strongly opposing the adoption of this proposal. In my opinion, Costco has a broad customer base that is likely more educated, enlightened and progressive than typical customers at Walmart, Tractor Supply, Ford, Bud Light and even Target. I don’t believe Costco is facing any consequential risk by standing firm on its current DEI policies.

The issue is not about DEI per se but about the undertone of the NCPRR policy group’s proxy proposal “demand” for research, which I believe echoes an extreme view that is really about underlying racism, along the same biased notion that books should be banned from schools and libraries if they aren’t seen as appropriate by a vocal cadre of conservatives. That may sound harsh, but unfortunately, the entire public conversation about DEI is polarizing and has become politically weaponized.

Balancing Act

Costco’s shareholders should consider the ramifications of allowing any activist group with extreme views to attempt to dictate the company’s underlying culture, policies and even, possibly, the brands and assortments it carries. Costco is, in my opinion, not only one of the world’s largest and most successful retailers but is also a paragon of virtue with respect to strategy, execution, policy and corporate behavior. It’s no wonder that the company almost always outperforms its peers in volume growth, and profitability, year in and year out. Its relationship with its employees is also exemplary, driven by the company’s age-old support for its premium wages and benefits. A marker for this position is the company’s remarkably low associate turnover.

I applaud the company’s courageous position on this proxy issue and hope all its shareholders find a way to “do the right thing” for all constituents, not just the activist shareholder that has currently mounted what I would characterize as a “thinly veiled threat.” My concern is that when you give shareholder activists the right to demand so-called research into a company’s cultural policies, the next thing you know they will demand a role in other underlying foundational issues best left solely to customers, shareholders at large, and associates within.

Doing the Right Thing

When all is said and done, a company is completely responsible for its actions. If its actions are appropriate its performance should reflect them. If not, then it should face consequences that are directly linked to its business results. Management positions taken should be well thought out, with risk and opportunity considered in advance. Positions on DEI should be considered, installed and practiced, not proclaimed publicly as marketing messages as they have been recently. Then, those positions should only be reversed for good reason, not a threat.

Costco’s DEI Challenge: Why It Should Concede Instead of Fight

Pam Danziger — Tue, 21 Jan 2025 05:01:00 +0000

Editor’s Note: This is the first part of a two-article point-counterpoint series on recent retail decisions about DEI. We are presenting two different views to explore the many facets of this polarizing issue.

Costco finds itself embroiled in the diversity, equity and inclusion (DEI) controversy. Unlike so many other major corporations that have caved to the pressure including Walmart, Tractor Supply, Home Depot Lowe’s, McDonald’s and others, Costco’s board is standing firm behind its existing DEI position. It contends its current policies are working for the good of its 300,000+ employees, customers, suppliers and shareholders and has asked shareholders to reject activists’ demands. Costco has an admirable four-part code of ethics – “Obey the law. Take care of our members. Take care of our employees. Respect our suppliers.” as the underpinnings of its “People and Communities” DEI program.

The primary issue seems to be not with the proposal but with who’s doing the asking, i.e., the National Center for Public Policy Research and its Free Enterprise Project. “We believe that the proponent’s request for a study reflects a policy bias with which we disagree and that further study and reporting would not be an efficient use of Company resources,” the Board explained.

De-Risking DEI

The demand is presented in a proxy proposal by the conservative National Center for Public Policy Research (NCPPR) and is not a demand to dismantle Costco’s DEI program as has been widely reported, but simply to study and report its effectiveness and potential risks.

Specifically, NCPPR requests the Board “conduct an evaluation and publish a report, omitting proprietary and privileged information, on the risks of the Company its current DEI (including ‘People & Communities’) roles, policies and goals.” The upcoming shareholder meeting on January 23 will determine the fate of the proposal: “The report requested by this proposal would not provide meaningful additional information to our shareholders,” the Board stated.

On the face of it, NCPPR isn’t making an unreasonable request, especially since the business case for DEI has not panned out with many companies that are dialing back their initiatives in the face of legal challenges and lack of ROI.

Datapoints

To be clear, the proxy proposal recommends a study to evaluate the current DEI policy. What company the size and reach of a Costco (number one after Walmart and number two after Amazon) doesn’t need valuable information on which to base strategic business strategies such as employment and hiring policies?

An October Pew public opinion poll revealed, “Compared with February 2023, workers are now somewhat more likely to say: Focusing on increasing DEI at work is mainly a bad thing and their company or organization pays too much attention to increasing DEI.” Further, far more Americans say DEI hurts white men than say it helps them (36 percent versus. 14 percent).

Research can validate as well as disprove DEI assumptions. Amazon just completed a two-year study of its own DEI program conducted by the law firm Paul, Weiss, Rifkind, Wharton, and Garrison. The report identified areas of improvement and Amazon shifted the focus of its DEI program. McDonald’s just rolled back its DEI program after conducting a risk assessment similar to that requested of Costco.

And Meta is the latest major company to divest itself of DEI. In announcing its change in policy, an internal memo distributed to employees stated, “The term ‘DEI’ has become charged, in part because it is understood by some as a practice that suggests preferential treatment of some groups over others.” One could argue that DEI has become the latest politicized policy magnet with President-elect Trump’s desire to de-DEI the government workforce.

To follow the logic of NCPPR, a public Board responsible for a company with a market cap over $400 billion should study the financial risks it faces should a DEI-related suit be brought against it. Further, focusing on the need for Costco to evaluate the risks, NCPPR used Costco’s employment data to estimate there are at least 200,000 employees who might claim illegal discrimination because they are white, Asian, male or straight, resulting in similar costly judgments if only a fraction of those employees were to file suit.

“Where is the company-specific data supporting diversity-is-good-for-the-bottom-line platitudes? I would go so far as to say that it may well constitute a per se breach of duty if there is no relevant company-level data being sought or analyzed,” Padfield added. Cautionary note: Data is information, analysis is intelligence and you need both in a balanced study.

Balancing Bias

The primary issue seems to be not with the proposal but with who’s doing the asking, i.e., the National Center for Public Policy Research and its Free Enterprise Project. “We believe that the proponent’s request for a study reflects a policy bias with which we disagree and that further study and reporting would not be an efficient use of Company resources,” the Board explained.

NCPPR is transparent about its opposition to corporate DEI policies. “We oppose DEI because DEI institutionalizes racial discrimination. Among other risks, racial discrimination poses material risks to the company’s bottom line,” shared Stefan Padfield, a lawyer by trade and director of NCPPR’s Free Enterprise project. He cites a case against Starbucks brought by a white former Starbucks regional manager who claimed race discrimination played a part in her firing. A Federal Court agreed and leveled a $25.6 million judgment against Starbucks.

Growing Legal Risks

DEI is facing headwinds of late from customers as well as investors. The incentive is the Supreme Court’s decision to reverse affirmative action in higher education. For example, the attorney generals of 13 states sent a letter to Fortune 100 CEOs (including Costco’s Ron Vachris, along with CEOs of Walmart, Amazon, CVS, Home Depot, Kroger, Walgreens Boots Alliance, Target, Lowe’s, Albertsons, TJX and Nike) shortly after the Supreme Court ruling against Harvard University that its race-based admissions policy violated the 14th Amendment. The AGs warned companies their corporate DEI programs could put them on the wrong side of federal and state law.

“Treating people differently because of the color of their skin, even for benign purposes, is unlawful and wrong. Companies that engage in racial discrimination should and will face serious legal consequences,” the letter stated. “Such race-based employment and contracting violates both state and federal law, and as the chief law enforcement officers of our respective states, we intend to enforce the law vigorously,” the letter warned.

Is DEI Effective?

Corporate DEI programs under various names have been around since the mid-1960s but picked up steam over the last decade, giving academic researchers plenty of data to work with to evaluate the programs’ effectiveness.

McKinsey DEI Studies

Professors Jeremiah Green and John R.M. Hand tried to replicate numerous studies by McKinsey that served as a foundation for corporate DEI programs and found the McKinsey studies couldn’t be statistically verified. In a study published in the Econ Journal Watch, they concluded:“[O]ur results indicate that despite the imprimatur often given to McKinsey’s 2015, 2018, 2020, and 2023 studies, McKinsey’s studies neither conceptually — nor empirically — support the argument that large U.S. public firms can expect on average to deliver improved financial performance if they increase the racial/ethnic diversity of their executives,” they wrote.

DEI Training Can Divide

A recently published study from the Network Contagion Institutes (NCRI) at Rutgers University tested the effects on students of DEI training and concluded that DEI training programs can increase hostility and exacerbate inter-group conflicts or, as the researchers wrote, “Some DEI programs appear to backfire.”

Similar results were reported by Professor David Haskell in a paper entitled “What DEI Research concludes about diversity training. He cited over 40 academic studies that found DEI training “is divisive, counter-productive and unnecessary.” He concluded, “When it comes to harmony and tolerance, DEI does not make things better, but can make things worse.”

Corporate Board Diversity

In 2021, Nasdaq proposed a board diversity rule to the Securities and Exchange Commission (SEC), which it subsequently approved. The rule would have required Nasdaq-listed companies to have at least two directors who must be“diverse,” including at least one director who self-identifies as female and at least one director who self-identifies as an underrepresented minority or LGBTQ.

In a position paper opposing that ruling, Harvard Law Professor Jesse Fried wrote, ”Nasdaq cannot cite any high-quality study showing that board gender or ethnic diversity boosts returns, because there has been none. In fact, there is a sizeable body of academic work reporting the opposite results: diversifying boards can harm financial performance.” In December, a Federal Court vacated the SEC approval of the Nasdaq rule. The SEC could appeal that decision, though with the Trump administration taking office later this month, it is unlikely to do so.

The ROI in DEI

We all agree that the objectives of DEI programs – to have workplaces reflect the diversity of our community, be fair and equitable in hiring, promotions and pay and be welcoming regardless of race, ethnicity, gender, sexual orientation or identity, religious affiliation and disabilities – is not only a good thing but still required under federal and state law.

But the implementation of corporate DEI programs may not be living up to those objectives, suggests Harvard professor of business Management Robin Ely and Morehouse College president David Thomas in a seminal Harvard Business Review article, “Getting Serious about Diversity: Enough Already with the Business Case.”

They affirm through research findings that greater workforce diversity doesn’t translate into better business results. “Leaders may mean well when they tout the economic payoffs of hiring more women and people of color, but there is no research support for the notion that diversifying the workforce automatically improves a company’s performance.”

They argue for business leaders to adopt a “learning orientation” to measure the real-world effectiveness of such programs. “To make real progress people – and the organizational cultures they inhabit – must change. But instead of doing the hard work involved, companies have generally stuck with easier, more limited approaches that don’t alter the status quo. Taking an ‘add diversity and stir’ approach will not spur leads in your firm’s effectiveness or financial performance.”

Ely and Thomas stress the moral imperative for diversity in the corporate culture, calling on leaders to “embrace a broader vision of success that encompasses learning, innovation, creativity, flexibility, equity and human dignity.”

In fact, they caution that too much emphasis on the financial case for diversity can send a wrong message “to traditionally underrepresented employees that they are worth hiring and investing in only because having ‘their kind’ in the mix increases the firm’s profitability.”

They advise, “Companies will not reap benefits from diversity unless they build a culture that insists on equality.” To meet the goals and objectives of a corporate DEI program – and by no means are they all financial – the authors insist companies must continue to learn from their existing programs and adapt them as appropriate.

“The problem is that nearly 25 years later, organizations have largely failed to adopt a learning orientation toward diversity and are no closer to reaping its benefits. Instead, business leaders and diversity advocates alike are advancing a simplistic and empirically unsubstantiated version of the business case,” Ely and Thomas wrote.

Taking a Pause

In my opinion, conducting a full investigation of Costco’s DEI program as NCPPR proposes would be a great SWOT learning exercise to identify Costco’s strengths and weaknesses, opportunities and threats related to DEI. “This is a rapidly changing landscape in terms of law, regulation and market sentiment, and shareholders accordingly have got reason to ask for a review,” Padfield states.

Costco disagrees and believes it is doing the right thing for all concerned. “Our focus on diversity, equity and inclusion is not, however, only for the sake of improved financial performance but to enhance our culture and well-being of people whose lives we influence,” it stated.

More Trouble Brewing

Anti-DEI crusader Robby Starbuck layers more complexity onto the Costco scenario. He states in a recent X post: “For now I suggest conservative consumers find other places to spend their money if Costco is so dedicated to doubling down on DEI. If they’re smart, Costco will do right by their shareholders and change before we turn our attention to them.” Starbuck has been successful in flipping corporate policies to what he describes as a “culture of sanity and neutrality.” Tractor Supply, Lowe’s Harley Davidson, Ford, John Deere and Walmart are already on his scorecard. Will he make a dent with Costco?

Peter Drucker, the father of modern business management, famously said, “You can’t manage what you don’t measure.” The NCPPR proxy proposal is that Costco should measure the risks and rewards of its DEI program to manage it going forward. I believe the Board and executive leadership should jump at the chance rather than run from it.

TRR’s Take on the Tapestry Capri Acquisition

Marie Driscoll — Mon, 27 May 2024 10:00:00 +0000

On April 22, the Federal Trade Commission (FTC) sued to block the Tapestry Capri acquisition, a “deal that seeks to combine three close competitors; Tapestry’s Coach and Kate Spade brands with Capri’s Michael Kors brand. If allowed, the deal would eliminate direct head-to-head competition among Tapestry’s and Capri’s brands. It would also give Tapestry a dominant share of the “accessible luxury” handbag market, a term coined by Tapestry to describe quality leather and craftsmanship handbags at an affordable price.

The FTC needs a radical course correction regarding its understanding of the market Tapestry and Capri compete. The accessible luxury market was defined by price; Tapestry redefined its market as modern luxury to better reflect consumer desires and behavior in 2014. Buyers of luxury handbags span multiple age groups, psychographics, and income levels — modernity has few limits. If the FTC were to correctly apply the concept of modern luxury to Tapestry’s TAM, it would quickly realize the nearly boundless opportunity for multiple handbag brands.

Henry Liu, Director of the FTC’s Bureau of Competition goes on to say Tapestry’s goal to become a “serial acquirer” with its Capri acquisition, “threatens to deprive consumers of the competition for affordable handbags, while hourly workers stand to lose the benefits of higher wages and more favorable workplace conditions.”

Making Sense of Nonsense

Dozens of analysts, consultants, and advisors have commented on the senseless nature of this suit and here are my additional thoughts about the absurdity of the FTC suit.

This acquisition would better position the combined companies to compete in the global accessories market as well as in the U.S. where international firms at the high end (LVMH, Kering, Richemont), low end (Shein, Zara, Mango) and modern luxury end (All Saints, Longchamp, Maje) are capturing emotional connection and mind and market share. Meanwhile, domestic brands, including Kate Spade and Michael Kors, are ceding share to a steady flow of new international and domestic brands on novelty and newness, the stuff that feeds fashion trends
Coach may have created “accessible luxury” in the early 2000s as the FTC cites, but it changed direction along with consumers when it created “modern luxury” targeting consumers across demographics, psychographics, geographies, income levels and where aspiration and emotion are the purchase drivers, not accessible price points. Its total addressable market (TAM) today is about $200 billion globally.
Low barriers to entry mean the market is not at risk of monopolistic or duopolistic power. The potential unintended consequence of blocking this acquisition is a U.S. polarized handbag marketplace dominated by high-end French and Italian luxury brands and Shein, reducing consumer choice in the middle.
Protecting women in their shopping choices of luxury handbags seems specious. Why doesn’t the FTC look at financials, media, healthcare and pharmaceuticals, categories extremely difficult to separate truth from marketing and where the implications are more serious? In the aftermath of Too Big to Fail, the continued consolidation of the banking sector surely potentially jeopardizes more American consumers than the combination of a handful of modern luxury consumer brands.
There are unintended consequences. Blocking this combination throws cold water on potential future exits for entrepreneurial brands that need funding and would choose a strategic investor over an often more preferable financial investor. Strategic transactions would have a higher hurdle given the FTC’s stance on the Tapestry/Capri transaction.

Tapestry Capri Acquisition and the Modern Luxury Market

The FTC needs a radical course correction regarding its understanding of the market Tapestry and Capri compete. The accessible luxury market was defined by price; Tapestry redefined its market as modern luxury to better reflect consumer desires and behavior in 2014. Buyers of luxury handbags span multiple age groups, psychographics, and income levels — modernity has few limits. If the FTC were to correctly apply the concept of modern luxury to Tapestry’s TAM, it would quickly realize the nearly boundless opportunity for multiple handbag brands.

Couple that with the low barriers to entry in the handbag market in the last 25 years. Look at the success of Michael Kors (who entered handbags in 2004) and Rebecca Minkoff (2005). Why even Monica Lewinsky leveraged her moment of fame and created a handbag line that had a moment in 1999.

Brand Extensions

Many fashion designers enter the handbag market to round out their assortment and because of the intrinsic attractiveness of the category. Fit isn’t an issue and seasonality is reduced. The proliferation of brands launching handbags and accessories is into categories where brands can leverage their unique power/emotional connection and monetize it.

Extending a fashion brand to handbags provides a higher margin growth opportunity. Just take a stroll around Bloomingdale’s flagship’s third and fourth floors and you find handbags and other accessories on brand mannequins providing shoppers with more brand options. For example, AllSaints, Zadig & Voltaire, ba&sh, Maje, Pinko, Ted Baker, Sandro, Whistles, Max Mara, Lafayette 148, and Ralph Lauren who are fashion (apparel) brands that offer handbags alongside their fashion offerings. And this doesn’t include the handbag department nor the luxury shop in shops.

An anecdotal NYC channel check of better and luxury department stores reveals 40+ handbag brands offering handbags in the $200-$1000 range in the handbag/accessories department. Move beyond that to the shop-in-shop luxury brands and add another dozen or so. When you add in the fashion brands elsewhere in the store. It is obvious that the modern handbag market is highly competitive, regardless of the size of the top players.

Field Notes

To get a broader pulse of opinion from smaller handbag brands and entrepreneurs, we asked a few who by and large think it’s a non-event.

Emily Blumenthal has been a part of the handbag industry for 20+ years, writing books, advising, speaking, and teaching.Blumenthal, dubbed the “Handbag Fairy Godmother” by the New York Times told us if the acquisition goes through, “it wouldn’t impact the success of new market entrants. Moreover, there are too many players for it to impact pricing, and multi-brand players in other categories—apparel and footwear. The Liz Claiborne and Jones NY portfolio companies never had that pricing power. The barriers to entry are not high enough to stop any aspiring or established handbag brand.”
Tiffany Zhou, entrepreneur, and founder of Oleada handbags for the working women said, “On one hand, this merger could create more exit opportunities for emerging American brands, as the combined entity might seek to acquire innovative labels to enhance its portfolio. On the other hand, this consolidation could pose challenges and raise barriers for independent brands trying to access top-tier supply chains.”
GiGi New York advocates higher quality (and subsequently higher price). With fewer items and fewer wholesale customers, the brand has established brand equity and built a better business. The FTC has contacted GiGi New York to make its case. Tom Glazer, president/owner of GiGi New York which he founded in 2010 says, “Blocking this Tapestry/Capri combination will not change anything, Coach and Kors are already giants and combining them won’t impact the consumer other than potentially lowering prices as they pass on some of the operational cost savings. Leather supply will be impacted for smaller players as the top tanneries in Europe work with fewer larger players —think Kering and LVMH. As a made-in-the-USA brand, it’s impossible for GiGi New York to compete on price. When we entered the market, we decided not to compete on price, you haven’t been able to win on price for more than 20 years.”

Pragmatics

As any business student knows, as long as investors and the markets want growth and business operators want to protect brand equity, there will be a cap to a brand’s natural expansion. The growth mandate will be met by line extensions into adjacent categories, internal development of a new brand and/or the acquisition of other brands that provide growth opportunities (potentially a serial acquirer). This is the model at LVMH, L’Oréal, P&G Colgate, as well as financial, media and pharmaceutical empires. It just doesn’t make sense to meet growth objectives with expansion that undermines future cashflows, thus new brands are the lifeblood of businesses. That the FTC should single out handbags as a category where women need protection, shows they don’t understand the handbag business or shoppers.

There is also a real estate play. In a conversation with Soozan Baxter, owner, Soozan Baxter Consulting, she pointed out that the market seems to be missing the real estate angle. “Ignoring the power that both Capri and Tapestry have in the outlet world. When building a center, there are a few retailers that really act as anchors and draws to achieve additional leasing. Coach, owned by Tapestry and, Michael Kors, owned by Capri, are two of the most dominant players. Their power to make or break a project, as well as drive favorable lease terms, has importance in this industry sector.”

Agreed! In a Michael Porter Five Forces industry analysis sense, the shopping center operators would lose industry power to the expanded bargaining power of buyers/tenants. We believe the large outlet operators, such as Simon Property Group, which operates 69 premium outlets in the U.S. and Tanger (38 outlet centers) would opt for a no-go on a combined Tapestry/Capri.

End Notes

The FTC doesn’t understand how women shop for handbags. Fashion consumers are communicators of status, style and culture. They shop across all channels and buy a range of silhouettes, colors, and luxury brands. A handbag is an emotional purchase. Consumers trade up for emotion and down for generics, utility, and convenience. Discretionary handbag purchase decisions are nuanced, spanning emotional considerations, how does the brand/handbag make one feel? The emotion can be sophisticated, fashionable, artistic, businesslike; product attributes including does it match an outfit, does it hold all the necessary items; and price. If emotion outweighs fiscal prudence, there are multiple payment options for consumers, which have allowed many women to trade up to handbags that prudence would say was beyond their financial reach.

Tapestry is looking to survive and expand in a new business environment similar to the environment they encountered in 2014 when they coined modern luxury. A united Coach/Kors/Kate Spade is no guarantee of success, as the demise of other fashion portfolio companies (Liz Claiborne, Jones NY) can attest to. In fact, unless they exercise strong brand guardrails, (which I believe they will) they could jeopardize derivative me-too products that copy the success of one brand and might not be relevant for the other. I just wish the FTC would spend its currency on matters of greater import.