Squirrel Spotting: Why Retailers Struggle to Fire Brands

Brands have been in the news of late, with Watches of Switzerland’s acquisition of the U.S. arm of Roberto Coin, and Richemont buying Italian jewelry brand Vhernier.

This follows earlier news that De Beers Group will dissolve Forevermark in the United States and other markets and relaunch it as a diamond jewelry brand in India.

And, of course, we had last year’s announcement that Rolex is acquiring Bucherer.

These developments got me thinking about a related question, and that is, why do retailers struggle to fire brands when they no longer perform for them?

You might think such decisions would always be as simple, as the numbers are either working or they’re not.

If the sales and profitability are good for business, you keep the brand. If the metrics don’t work, you fire the brand.

How complicated is that? As it turns out, it’s pretty complicated.

In the face of declining sales, reduced margins, and unhealthy inventories, retailers continue to forge ahead with brands that once were important to them but have long since ceased to enjoy favored-partner status.

They don’t like the brand enough to cheerlead for it internally or externally but still remain indifferent enough to continue to defer on separation decisions.

Psychologists have several explanations for why this happens, but the two that stand out for me are the status quo bias, and the sunk-cost fallacy.

In the first instance, the status quo bias, we know we should make a change, but the headaches associated with doing so far outweigh the benefits of pulling the plug.

In “A New Way To Think: Your Guide to Superior Management Effectiveness,” Roger Martin wrote, “In short, research into the workings of the human brain suggests that the mind loves automaticity more than just about anything else—certainly more than engaging in conscious consideration. Given a choice, it would like to do the same thing again and again.” 

There is a tendency to rationalize the status quo bias as being related to habitual loyalty; we do it because we’ve always done it, it’s easy. The reality, of course, is that it is more aptly related to inertia. 

We don’t want to change because doing so means a ton of work, and we’re not looking to take on more work. 

As for the principle of sunk-cost fallacy, that’s a very real thing and a powerful impediment to change.

We justify the years we’ve spent, the money we’ve invested in inventory, training, marketing, and even shop-in-shops.

We worry our team will struggle with change, when, in fact, they’re often well ahead of the principles of the business, as they’ve lived it on the front lines and have seen the decline in interest and/or effectiveness of the brand.

We also worry that customers we’ve sold a given brand to over the years will regret having purchased the brand from you if you choose to discard the line. Will they feel betrayed and take their business elsewhere?

Every restaurant that ever closed its doors has disappointed some diners. Every store that has ever closed had some fans. And every brand that was important at one time has customers who are collectors and repeat buyers.

The problem is, in all cases, there just weren’t enough of them. Things change and people move on. They are rarely as distraught as your worst fears may conjure.

In fact, one of the paradoxes of consumer behavior is that while it is commonly accepted that shoppers love automaticity, and automaticity often comes from brand consistency, we are also apt to seek out change.

In “Using Behavioral Science in Marketing: Drive Customer Action and Loyalty by Prompting Instinctive Responses,” Nancy Harhut wrote, “People are hardwired to notice things that are different from what surrounds them.” 

It’s one of the reasons many retailers love to go to trade shows, to experience what’s new, and it is one of the reasons I believe quality physical retail stores will always be relevant. 

Customers love the sense of excitement and discovery often delivered in the best retail environments. 

As for those brands you need to address, my advice is, if you can’t bring yourself to completely sever ties, recalibrate your investment to align with the brand’s relevance to your business today, not what it used to be. 

That means adjusting your inventory, your case space, and your training and marketing spend. 

Block out the noise, including the noise inside your head, and do what’s right for your business. 

Happy retailing!