In 1982, Johnson & Johnson experienced what can only be described as an absolute nightmare scenario: Seven people in Chicago died after ingesting cyanide-laced Tylenol. While many predicted that this horror would utterly destroy the company, Johnson & Johnson got past the tragedy, and today remains one of the biggest players in the consumer packaged goods industry. In 2013, the company experienced $71.3 billion in sales.
That's not to say that handling the crisis was easy. It's reported that Johnson & Johnson spent upwards of $100 million and an uncountable amount of time in its efforts to get back on safe ground with the public, restore its image and reassure consumers that something like this could not and would not happen again. While the ordeal was bad, it could have been cataclysmic had it been improperly managed, and the fact that the company is still robust today serves as a case study on how companies can weather storms, whether they are unexpected or seen coming on the radar.
How consumers perceive companies in and out of crisis has a lot to do with how well the company itself navigates the retail and consumer packaged goods (CPG) landscape. But today's landscape looks completely different than the one of 30 years, or even a few decades, ago. Today, consumers are much more connected to just about everything–each other, their work, the stores in which they shop, the marketers behind the products they buy.
"A lot of decisions that companies used to make privately are now playing out in public," explains Bill Bishop, chief architect for Brick Meets Click, Barrington, Ill.
And in today's age of social media explosion, says Kelly Tackett, research director for New York-based Planet Retail, the stakes are even higher for retailers to be upstanding citizens.
"Social media has the power to immediately indict, essentially, companies that aren't adhering to certain values."
"Social media has the power to immediately indict, essentially, companies that aren't adhering to certain values," she says.
For retailers, all of this means that how they are perceived by consumers–before, during, and after an event–has become highly important, and continues to grow as a priority. Anything less than stellar could run the gamut from frowning consumers to dire loss of sales. To be seen as a good corporate citizen is the gold star companies desire.
CONSUMERS AND EMPLOYEES CARE
Before a retailer can present an upstanding image, they need to ask themselves a tough question: What does it now mean to be a good corporate citizen?
"There are so many facets that it's hard to find one company that is delivering on all aspects of corporate responsibility," Tackett says. But one working definition of corporate responsibility today is a company that is working toward both the community it serves and the broader environment. She adds that there are several retailers that do a good job of hitting one or two core sustainability principles, such as Costco for their exemplary treatment of their employees, and Kohl's for its commitment to making its stores more energy-efficient. And though Walmart is often a heated source of debate, Tackett says that it has been doing a lot of work to improve its supply chain and protect the environment for future generations.
Overall, "you're seeing the combination of ecological initiatives that help the environment and sustainability," Tackett explains, adding that treating employees well enables them to contribute to the broader society.
"It's important to retain the happy employee base simply because nobody wants to shop somewhere they're not feeling valued, and where they have uninterested sales staff," Tackett says. "If they want that lack of interaction, they can shop online, and probably also find a better price."
Combine that with an increased consumer desire for transparency from retailers, and it's easy to see how corporate responsibility can greatly affect how and where consumers spend their money. Though many of the traditional drivers of store choice remain firm–pricing, convenience, location, assortment–Tackett adds that "corporate responsibility is evolving, particularly with millennials coming of age. That has been a large factor in some retailers' social responsibility initiatives because they want to capture that younger consumer who is less loyal to brands and retailers, and more willing to support retailers and brands whose philosophies align with their own."
Brick Meets Click's Bishop cautions retailers, however, against pigeonholing this issue as one that only concerns millennials.
"If you did a percent distribution, all things being equal, millennials would, I'm sure, be a bit higher" on concern for corporate responsibility, he notes. "But it's really driven by the broader world in which the shoppers live. This is an issue for other generations as well, and retailers don't want to miss that opportunity to take advantage of it."
GOING GLOBAL, STAYING LOCAL
It's true that there are many issues catching consumers' attention these days, but not every consumer is passionate about the same issue. Where one may be concerned with how the retailer is treating its employees, another may be intent on knowing that the retailer is treating its suppliers well and sourcing sustainable, fair-trade products.
As concerns vary among chains, and even among individual stores within chains, staying consistent on the corporate responsibility message can be a challenge. Tackett encourages retailers to employ global localization, or "glocalization," to better stay on message and address consumer concerns.
"We're now being faced with so many large global retail players, but as they expand across markets internationally, there is still the need to adapt to everything from the assortment to store opening hours, to everything in between to what that specific market wants," Tackett explains. "It requires retailers to set up a certain way to allow for that flexibility. You have to make changes that are specific to a market, but I think those retailers who have employed such techniques have seen great returns on that."
How aggressively a retailer handles any one issue depends, Bishop notes, on the customers of an individual store.
"[The response] ought to flow directly from the retailer's assessment of the customers of each store," he says, adding that the size of the retailer can determine how effective the strategy may be.
"This works to the advantage of your medium-sized and smaller companies that are closer to the market," Bishop says. "This is something the smaller retailers can use to their advantage, because the bigger chains will have more difficulty doing so."
Outlining a foolproof plan to show the world how your company is leading the retail industry in corporate responsibility is nothing short of impossible. The unexpected is bound to happen and can potentially dash any carefully designed program. A retailer's goal, then, isn't to necessarily have the perfect strategy, but to simply be prepared.
Brick Meets Click
"The vast majority of companies are introduced to corporate citizenship when there's a problem," Bishop says. "And from the beginning they're digging out of a hole."
To combat this, retailers should first look at their internal workings and establish a solid foundation with their employees, and then move to customers.
Bishop suggests that retailers scan their business and their customers for enterprise risks that could possibly surface that would affect their established mission of corporate responsibility. There are areas that have a higher risk of becoming problematic, Bishop notes, such as lowering employee wages or benefits, or establishing yourself as a responsible long-term trading partner.
"But if they can get through the problems of today it's going to be worth the retailer's while because it allows them to enhance its brand," Bishop says.
Once vulnerabilities are identified, a program can be developed that demonstrates that if ever a retailer is surprised on an issue, they're working to solve it.
Bishop goes back to the example of a company needing to reduce wages or benefits. Obviously employees will be unhappy, which is not only worrisome for the employer but also worrisome as to how it will affect the consumer shopping experience–after all, who wants to shop in a store with disgruntled employees?
"How you begin to handle the situation is to take the temperature of your employees, and understand where they're chafing and why," Bishop explains. "If you're working on it, you're looking at how you can take the best care of your employees before wages or benefits even become an issue."
To develop a strong foundation of corporate responsibility on the outside, Retail Planet's Tackett notes, retailers also need to consider what benefits consumers, and learn how to communicate those objectives.
"Retailers have increasingly many touch points they can use to connect with their shoppers," she says. "So it's a matter of getting to know their shoppers better and find out what are those areas that are most relevant to an individual retailer's shopper, and leveraging that to deliver the strategy."
Tackett adds that corporate responsibility increasingly revolves around new legislation, and it's essential that retailers get out in front of those issues rather than being forced to implement regulations by law.
While there is no definitive answer as to what makes for a responsible corporate citizen, strategizing with both consumers and employees in mind is a start. But keeping the strategy going will depend on how the retailer handles any surprises.
"It's a very complex issue, and consumers are very capable of changing opinions and changing perceptions," Tackett says. "It's something that's going to evolve."