US Insights

Buy a Nation Get One Free

Bryan Gildenberg

Chief Knowledge Officer, Retail, Sales & Shopper

Brands 03.04.2018 / 08:00

kt_com_Takeaway 2

Fragmentation is much bigger than the 2016 election.

To think about fragmentation over the past year, let’s go back before Kantar’s November 2016 inaugural FragmentNation event. I was on the planning committee for the event and at that time we were busy with the agenda. In one of our meetings, I remember a colleague making a really telling remark: “People will be sick of talking about fragmentation and polarization by the time the election is over.” I was struck by this comment because it echoed a view shared by many that the 2016 presidential campaign was the cause of fragmentation rather than a symptom of it.

Looking back, it’s clear that fragmentation is much bigger than the 2016 election. The scope of fragmentation can be understood on two levels. First, fragmentation is the central story of the marketplace. At Kantar, we have been describing the long-simmering structural polarization of the U.S. for years. It is the only way to understand an industry like retail that has 100 percent household penetration.

It is not unfair to say that in terms of income inequality, the U.S. is now the largest emerging market in the world. Income disparities as large as those in the U.S. require marketers to think about the affluent haves and the impoverished have-nots side by side.

The impact of these levels of structural income inequality is both caused by and causes differences in healthcare, diet, education, childcare, transportation and time management, which show up in many ways, especially life expectancy. These are under-explored opportunities to help lower-income consumers with solutions, experiences and products that better meet their needs.

Add to this the growing ethnic diversity of the U.S., particularly how different it is for people over 50 and those under 30 years old. This portends enormous social tension. On many occasions, I have pointed out that there are neighboring countries in the world engaged in armed conflicts over ethnic differences that are more similar to one another than the ethnic gap between 50-plus America and under-30 America.

Marketers can’t help but see it now, and so must finally deal with it. In retrospect, I regret that we weren’t able to elevate these issues more visibly and more viscerally earlier. It makes me feel a bit like the Night’s Watch in Game of Thrones running from a zombie dragon.

The second level on which to understand fragmentation is less philosophical and more about the relentless change affecting the world of retail. There has been a lot of press about retail over the past year. Amazon’s acquisition of Whole Foods was the biggest headline, but there was also plenty of news about the seeming collapse of department stores, Lidl’s entry into the U.S. market and store closings and bankruptcies.

Much of what’s happened over the past year has been more or less predictable, and for the past few years, we have been warning of these developments. What’s at work is a phenomenon we call “Buy A Nation, Get One Free,” which is about the trap of getting caught in the middle. The upside for retailers is to recognize that as the marketplace fragments, there are more distinct opportunities available. The decline of the middle means more opportunity at both the top and the bottom. Fragmentation may be harder to navigate, but there are more places with opportunities for growth. The bankruptcies making the news are inevitably retailers caught in the middle.

Target, Sears and Toys ‘R’ Us, as well as department stores, had either a tactically or an existentially challenging year. Lidl, too, because as it so often does when it first comes into a market, Lidl struggled with understanding its exact position within the context of competitors.

When it comes to Amazon’s acquisition of Whole Foods, we believe this combination has the potential to become the first true retail experience to take full advantage of the upside potential in the “Buy A Nation, Get One Free” paradigm. Imagine walking through Whole Foods with your Amazon Prime app open, able to in realtime decide whether you want the more expensive organic oranges in front of you or less expensive conventionally grown oranges available through Amazon Fresh. Imagine running through the shopping trip, paying for both the Whole Foods and Amazon Fresh purchases at the register with no additional checkout steps and the things you bought on Amazon Fresh delivered to your home by the time you arrive back from Whole Foods.

That said, over time it is possible that Amazon could get caught by the “Buy A Nation, Get One Free” paradigm. This happens all the time. What once was a unique, defensible position at the top or at the bottom suddenly becomes the middle. It’s even happened to Amazon before. The Amazon Fire Phone wasn’t as good as an iPhone or as cheap as low-cost competitors.

Amazon could certainly get caught in the middle fending off hundreds of small, nimble players that stay close to their consumers in a deeper way on the premium end while being seen by the public at large as the new public enemy number one at a mass level. Those small, nimble players may have a business model architecture—like Walmart’s Jet.com, for instance—that enables them to scale customer engagement and retention efforts in a way that easily and effectively competes with a much bigger player like Amazon.

The fundamental idea is that retailers must either segment their focus on specific consumers and shopping trips or use data and insight to tailor their stores, marketing and offers to connect more specifically with individual customer needs—or both! The past year makes it clear that this fundamental paradigm of “Buy A Nation, Get One Free” will be the driving dynamic in retail in 2018 and well beyond.

Source: Kantar


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