Fast or Frivolous 2018: How consumer brands are evolving, accelerating and evaporating

The Backstory

Fast or Frivolous? How consumer brands are evolving, accelerating and evaporating, our flagship report from 2017, charted the rapid changes—but also continuity—that the internet brought to the consumer economy. Before the internet, the playbook for consumer brands remained largely static, with incremental improvements such as catalogs, but the digital revolution gave rise to a new flurry of activity and distribution methods. Thanks to a the digital point of entry, which requires much less capital and resources, the number of brands flowered exponentially.

But even though the landscape changed, the fundamental process of doing “good business” did not. The maxims, “don’t spend more than you make,” and, “don’t grow too fast,” should have continued to guide consumer brands, but many batted these adages away as antiquated and no longer relevant to their digitally-native philosophies, particularly given the abundant influx of venture capital funneled to digital brands, totaling billions of dollars—a level of financing that legacy brands did not raise. Subsequently, many digitally-native brands grew too fast and spent too much—some have since shuttered, while many others struggle to stand out, stay afloat or find suitable exits that make money for everyone involved in the business.

2018 has been one of the more transformational years in the consumer economy, largely affirming the path Fast or Frivolous 2017 anticipated brands to follow. First, while the rise of new digitally-native brands has not slowed, more are diversifying their channels into offline spaces. Witnessing this return to traditional avenues, we saw the peak of digitization in 2017, and that increasingly, digitally-native businesses are returning to the multi-channel sales strategy that brands have always used, in which ecommerce, retail and wholesale all play a role. As more traditional brands devote greater attention to selling direct-to-consumer as opposed to wholesale and offline retail, multi-channel businesses will grow more uniform, regardless of whether a brand started online or offline.

This report is both a follow-up of Fast or Frivolous 2017—a continued exploration of what the brands featured in the original report have faced over the course of the past year—and now an ongoing annual survey of the consumer brand landscape.

This Special Report is available to our annual Plus, Team and Premier Members. Learn more

Altruistic commerce or commercial altruism? The benefits and limitations of philanthrocapitalism

In today’s hyper-globalized and -politicized world, more consumer product companies are seeking to align with initiatives that ameliorate society and the world, either at inception or later in their life cycle. Whether environmental sustainability, social justice or technological democratization, for-profit companies incorporate elements of the nonprofit world into their business models—at least on paper.

But regardless of the sincerity and impact of their socially-minded missions, for-profit companies are inherently driven to generate as much revenue and profit as possible, at the expense of everything else. This report questions the sincerity and effectiveness of their social missions, outlining the inevitable tradeoffs that for-profit companies make in order to both run their businesses and give back to society.

Read the playbook

Marketing a social mission: The complexities of Nike and Citibank’s socially-minded campaigns

In their attempt to appease consumers, many companies are tying their brands to social missions, which they can easily promote through advertising. As Scott Goodson, founder of the marketing agency StrawberryFrog, argues, companies may compete on price, but the real way to compete is by “differentiat[ing] on values… It’s in the interests of these companies that they solve some of these big issues. The environment is falling apart? Yes, they should fix it; otherwise they will have fewer consumers.” What Goodson’s remark doesn’t acknowledge, however, is that many of these companies were complicit in the erosion of the environment, among other social causes that they may donate to or actively address as a social enterprise today.

In one of the more egregious capitalizations (and exploitations) of a social cause, the cosmetics company Hard Candy filed a patent in January 2018 to create a #MeToo line of beauty products. New York City’s annual LGBTQ Pride Parade has also grown increasingly corporatized over the years, with companies from Target to Lyft hosting floats emblazoned with company logos. The complications and the severity of the complications with this type of corporate endorsement can range—in this case, it depends on how LGBTQ-friendly their company culture is and how representative their support of the LGBTQ community during Pride is for their entire scope of actions as a business.

The danger in marketing a social mission lies in its perceived authenticity, as tied to the overall brand. As with a company that promotes inclusive values—trans rights, for example—this support is only as genuine as the company incorporates the values in its own business model. In other words, inclusivity should be a means, not an end—or just an advertisement.

Nike’s contract with Colin Kaepernick both capitalizes on and champions social justice.

The “Doing Good” Index: Social justice

On September 3, 2018, former San Francisco 49ers quarterback Colin Kaepernick announced his new campaign for Nike via Twitter that celebrates the 30th anniversary of “Just Do It” campaign. Kaepernick made headlines in August 2016 after he kneeled during the national anthem at a football game to protest racial injustice and police brutality (and subsequently was not tapped by any NFL team in 2017). The ad, displayed on a Times Square billboard, features a close-up of Kaepernick’s face and reads, “Believe in something. Even if it means sacrificing everything”—Kaepernick also provides the voiceover for a complementary commercial. The video first aired during the Falcons-Eagles season opener, only three days after Kaepernick’s announcement. Within less than a month, the video was viewed more than 80 million times on YouTube, Instagram and Twitter.

Kaepernick has been endorsed by Nike since 2011, but hasn’t be utilized in campaigns for the past two years. This new contract is a “star” deal—equivalent to that of a top NFL player, meaning Kaepernick will receive millions of dollars a year, plus royalties. It will also include a branded line of shoes and apparel.

Kaepernick’s announcement, as well as the video ad, quickly went viral, attracting both condemnation and applause. Initially, Nike’s stock fell, but it soon recovered. Three days later, the campaign was worth more than $163 million—Nike sales rose 31% in the first week. On the other hand, calls resounded to #BoycottNike and #JustBurnIt on Twitter. A series of memes quickly emerged, reappropriating the black-and-white Kaepernick ad with figures such as Donald Trump (who criticized the campaign). Other disappointed Nike fans cut the “Swoosh” logo off of their socks—one private Christian school, Missouri College, responding by dropping Nike as its sports uniforms supplier. Three days after the announcement, a poll found that 60% of consumers view Nike in a positive light, but that the percentage of those who saw the company negatively had grown from 7% before the announcement to 24% after its release. However, before one month passed, Nike’s market valuation had increased by $6 billion.

Criticism also emanated from the left, pointing to the tension—and contradiction—between Nike, a capitalist enterprise, and Kaepernick’s social justice platform. This raised concerns about the capitalization of social justice, a cause that companies may see as “in vogue,” and therefore seek to emulate in their brand image and amplify sales. These critics argue that because class injustice cannot be divorced from racial injustice, the campaign is “a reminder that late-modern capitalism can embrace and even promote radical, chic rhetoric as long as it does not call into question the ideology of capitalism itself.”

Regardless of its effect on the social justice movement, the campaign was a business move that was inherently for-profit in nature. It serves to strengthen Nike’s consumer base with a young and increasingly racially diverse demographic, particularly given that two-thirds of Nike customers are under 35. In doing so, Nike is expressing that supporting a politicized figure who happens to align with a core customer base is more important than appealing to everyone.

Others point out that although Kaepernick’s protest launched a movement across the NFL, Kaepernick got the deal while fellow player-supporters did not (most significantly, his former teammate Eric Reid, who has also not been signed by any NFL team for 2018 but lacks the income of a national campaign). In others words, though Kaepernick has suffered job loss, he is now clearly benefiting financially from taking a stance, when others are not.

Taken together, Nike’s campaign with Kaepernick is both a capitalization on and a reflection of a constantly shifting zeitgeist. Kaepernick’s fame and fortune is largely informed by consumer opinion, which Nike is simply (and smartly) reflecting in its sponsorship. In 2017, for instance, Kaepernick’s jerseys ranked among the top 50 NFL players in terms of sales, even though he wasn’t playing for a team. This development also conveniently aligns with Nike’s brand image as countercultural, manifested in the risk the company is taking by endorsing Kaepernick while remaining the official apparel sponsor of the NFL. However, this brings up another point of critique: that the appearance of being anti-establishment is different from enacting real change. “Nike has used the image of rebellion to sell its gear, while stripping that rebellion of all its content,” writes journalist Dave Zirin. The business world’s continued fixation on Nike’s rising market valuation since debuting the campaign further highlights the financial aim behind the company’s decision.

But as far as activist capitalism goes, Kaepernick is a solid and authentic celebrity to endorse and give a microphone to. The money he earns from his Nike contract will help him continue his youth activism efforts, including the Know Your Rights camp, a free youth campaign that teaches self-empowerment and raises awareness about interacting with law enforcement. Since he first protested on the field, Kaepernick has worked to show that the movement is not about him alone. He has refused to do interviews, choosing to utilize social media instead to voice his opinions (as of September 2018, he has 2.06 million Twitter followers and 3.1 million Instagram followers). Typically, however, Kaepernick retweets or shares the words of others rather than his own so as not to manipulate or claim the narrative. (Kaepernick first spoke publicly during his acceptance speech for the Amnesty International Ambassador of Conscience Award in 2018.)

Nike’s timing with the Kaepernick campaign is also noteworthy considering the potential for a campaign to draw attention away from other aspects of a business. Though it most likely was queued up to launch in tandem with the 2018-2019 football season when it would have the biggest impact, it’s important to remember that Nike is still recovering from its own HR scandal. Since March 2018, a deluge of claims from former and current employees have exposed the company’s toxic, “boy’s club” atmosphere and the company also has a long history of labor rights violations in its factories worldwide. This is not to argue that Nike is using the Kaepernick campaign as a cover up, but it certainly is grabbing headlines for the new ad. Even if some of these headlines are negative, it still means that fewer consumers are fixated on the unequivocally damaging press about Nike’s problematic internal company dynamics.

Boycotts and consumer fatique

As seen with Nike’s supporters and its critics, the politicization of a company always comes with implications, whether positive or negative. Taking a stance means forfeiting neutrality, which can strengthen a customer base and increase sales among some demographics, just as easily as it can plunge engagement with other consumer groups. The response a company receives also largely depends on the platform: Supporting an outspoken figure decrying racial injustice—and using him to campaign—is much more controversial than Patagonia supporting grassroots environmental activists.

Boycotts are one of the most common reactions to a company’s stance on a political or social matter. Though these actions have swarmed the modern-day landscape—from calls to ban In-N-Out after news surfaced that the company had donated to California Republicans to Papa John’s, after its founder issued a racist remark at a conference—these events have major media potential, but little economic impact on the companies themselves.

Even if a boycott spurs a company to make changes in the way it positions itself politically or governs itself internally, financial effects are likely the biggest incentive to alter behavior. In addition, a boycott or negative press may actually cause a company to neutralize itself politically—Chick-fil-A, for instance, has attempted to distance itself as a company from the beliefs and values of its founder. Another more dangerous implication is that a boycott may have the opposite effect than its supporters intended. Public figures in particular will seek to disassociate from a company they are connected with that’s receiving criticism, which “drives corporate donation practices underground, encouraging companies or CEOs to shift towards lobbying contributions or personal campaign donations, which require less disclosure and are harder to trace.”

Today, society may be approaching boycott fatigue. Between 1997 and 2007, only 213 boycotts were mentioned in the six largest U.S. newspapers, but in 2016, the #GrabYourWallet campaign, which urged consumers to denounce the Trump family’s companies, went viral, sparking boycotts of more than 50 companies in only 200 days. For consumers, the ubiquity of boycotts makes for an increasingly long list of rules to follow, not to mention that the more lodged a company and its products are in consumer culture, the harder it is to purge from consumers’ lives. In the midst of mass boycotting, it’s also possible that consumers want companies to simply act as companies, without taking a political stance. While consumers expect brands to “stand for something” more than ever, it’s plausible that over time, the pendulum will swing back, and shoppers will desire companies to remain agnostic, doing what they do best: selling stuff.

After sponsoring Citi Bike, Citibank’s brand image will be dependent on how the public-private bike-sharing program interacts with the New York community.

The “Doing Good” Index: Society, Environment

New York City’s bike-sharing program, Citi Bike, launched in May 2013, but the idea germinated in the Department of Transportation Secretary back in 2011. While the city approved of a bike-sharing program, it refused to sponsor it with tax dollars, leading the DOT to seek out Citibank as a potential sponsor. The bank, which has a long history of public-private partnerships, from financing the Marshall Plan to the Panama Canal, was still recovering from the 2008 financial crisis. But its attraction to the idea of sponsoring a bike-sharing program, especially in the run up to its 200th anniversary, convinced Citibank to agree to the DOT’s proposal.

Citibank contributed $41 million to pay for the program and a large portion of these funds were diverted from the bank’s marketing budget. Essentially, instead of funding traditional commercials, the bank “built something additive that… reduces [New York City’s] carbon footprint.” Coupled with the social mission behind the bike-sharing program, the bikes also displayed the blue Citibank logo, thus serving as thousands of roving advertisements. In 2015, internal research by the bank determined that favorable impressions of Citibank had increased 72% and by summer 2017, NYC was home to 10,000 public bikes in 55 neighborhoods, continuing to expand today.

As a public-private partnership from the outset, Citi Bike has received criticism based on the tensions between its capitalist practices and social mission. The program was founded as NYC Bike Share LLC, owned entirely by Alta Bicycle Share, a private company. Citibank’s association as the program’s sponsor raised eyebrows, not least because banks often arouse a good deal of societal distrust. In 2014, a company called Motivate acquired Citi Bike in 2014, which vastly expanded the initiative, but also added an additional corporate layer to the public program. Then, in July 2018, Lyft acquired Motivate—Lyft now owns Motivate’s technology, including apps, bike-tracking services, customer support and bicycle maintenance systems.

While the privatization of bike-sharing programs isn’t unique to Citi Bike—in April 2018, Uber acquired a dockless electric bike-sharing company called Jump—both Lyft and Uber have problematic histories of exploitation, whether in terms of hurting the taxicab industry or employing drivers for paltry wages. Especially for an initiative so grounded in community life, Citi Bike’s relationship to neighborhoods and residents of New York City has heightened significance. In turn, the overall success of privatized, city-wide bike-sharing programs will depend largely on how well these companies communicate with their municipalities and invest in improving city living conditions without doing additional harm.

While Lyft and Uber’s expertise will probably help the bike programs expand faster, these companies must remain sensitive to the neighborhoods they enter. In some neighborhoods, the bikes have become synonymous with gentrification, which has led city residents to protest. Annual membership to Citi Bike costs $150 and requires a debit or credit card transaction, which some NYC residents don’t have access to, effectively pricing them out. The parking vestibules used for the bikes have also taken real estate away from street vendors, which is the lifeblood of many neighborhoods in the city and the livelihood of their residents.

Still, the program’s director of external affairs has noted that as Citi Bike comes to more neighborhoods, it is collaborating with community-based organizations, “to ensure [they are] inviting community members in to the program from the start.” Citi Bike also offers discounted memberships to NYC Housing Authority residents and IDNYC holders, as well as to SNAP members (1.6 million New Yorkers) for $5 a month.

In any case, Citibank, Motivate and Lyft have certainly helped make biking more accessible and affordable in New York City, incentivizing more residents to use an alternative form of transportation and feel safer doing so. Since its debut, Citi Bike’s presence has catalyzed the city to build 98 miles of protected bicycle lanes, further altering the urban landscape for the better. The program has expanded the number of transportation options for residents, thereby decreasing overpopulated New York subway cars, and reduced the city’s energy footprint. While it would be too expensive for Citibank to reproduce NYC’s bike-sharing program in all the cities where the bank operates, focusing on the nuances of New York life and the needs of its residents—thereby minimizing any adverse effects and maximizing beneficial contributions to the city—will only become more important as the public-private partnership grows.