In less than five years, the reputation crisis of brands has gone up and everything seems to indicate that they will be even more stressed ahead of the hyper transparency demanded by consumers and, more concretely, the younger ones.
“We are looking for cool kids; the attractive all-American kid with a great attitude and a lot of friends”. After the publication of this statement, the back then CEO at Abercrombie&Fitch Mike Jeffries embarrassed the brand publicly. But it was 2006 and everything was anecdotic. However, in less than five years, the reputation crisis of brands went up and everything seems to indicate that they will be even more stressed ahead of the hyper transparency demanded by consumers and, more concretely, the younger ones. In this social network era, those issues entailing bad press have turned to boycotts and extreme sales reductions.
From bad press to boycott, social networks set fire to the reputation crisis. Dolce&Gabbana shares with Nike, New Balance, Abercrombie&Fitch or even Hawkers the experience of pissing off part of their consumers to the point of receiving a boycott. In the case of the Italian brand, the brand’s reputation crisis has even gone further to the point of being rejected by Chinese retailers like Lane Crawford or online platforms such as Tmall, JD.com or Secoo, as well as others from outside the country like Luisaviaroma or Yoox Net-a-Porter.
Experts claim that reputation crisis will be more frequent by the day due to the pressure to transparency exerted by social networks. Until now, brands have shown the strength to be above executives and unpredicted instances and, in the end, consumers have been willing to forgive. But how will Dolce&Gabbana solve this emptiness of clients and consumers?
A misinterpretation of cultural codes has caused havoc at Dolce&Gabbana in China. What started as a marketing mistake, with videos in which a Chinese woman was trying to eat pizza or pasta with chopsticks unsuccessfully ended up in a boycott campaign after one of the co-founders of the company, Stefano Gabbana, insulted the country.
“Three years ago, these matters were not even remotely this important, and a crisis such as this would have never had this dimension”, explains Carlos Magro
A week after the occurrence, Domenico Sole and Stefano Gabbana recorded a one minute long video in which they apologized. It was their last attempt to save their reputation as well as their company’s in a market such as the Chinese, which produces 32% of luxury’s global sales, according to Bain&Company.
“New generations of consumers value more and more every time the dimension of ethics in brands”, explains Carlos Magro, branding director at the consultancy Llorente y Cuenca. “Three years ago, these matters were not even remotely this important, and a crisis such as this would have never had this dimension”, claims the expert.
“Until now, the biggest reputational issues that brands could have, had to do with social responsibility”, states Lluís Miracle, retail expert, who recalls that the crisis of Nike and Adidas due to labour conditions in their sourcing factories in Asia. Nevertheless, “none of those polemics had any repercussion on sales nor on the prices of brands”, says he.
Experts agree on the fact that, until now, the greatest reputational scandals were related to social responsibility
Sports fashion, in fact, has also made social networks’ blood boil during the last months. Nike, for instance, caused a huge stir after the signing of the rugby player Colin Kaepernick for its last campaign. The polemic impacted its shareholdings, which during that period, reduced in 3%. Politics also impacted New Balance in 2016, after some declarations of a high executive from the brand, Matt LeBretton, in favour of Donald Trump’s victory.
But controversy reached Spanish brands too. In 2016, Hawkers was also involved in a similar problematic around social networks after joking about the building of the wall proposed by Trump. In any case, the brand’s crisis reputation is not something new.
Outside of fashion, two of the last huge reputational scandals have been the pollutant emissions of Volkswagen and the data leaks of Facebook to Cambridge Analytics. In a lesser measure, the declarations of founder Elon Musk on twitter did not benefit Tesla nor its stock value either.
“In a reputation crisis, what it is not communicated does not exist, and if what people want is to separate such narratives from the brand, the worst answer is silence”, claims Magro
“Reputational crisis are more usual than what people think, everything depends on how fast the answer is given and the platform through which these things are denounced”, points out Magro. The expert highlights that the hyper transparency demanded by society nowadays makes it more complex to manage these crisis and forces brands to be more proactive in that sense.
“In a reputation crisis, what it is not communicated does not exist, and if what people want is to separate such narratives from the brand, the worst answer is silence” says he. In that sense, Magro points out that the strength of the brand will also play in its favour, although having an issue of public impact will make it much more vulnerable.
In this social network era, it is consumers who control the narrative and who, consequently, forces companies to act with the fastest speed possible. According to the expert, the most common mistake in these situations are, on one hand, the ‘ostrich technique’, that is, hiding your head through a hole, and on the other, trying to deny or cover the negative parts of the issue. “People can not be late to answer, because the control of the narrative will be lost, and they cannot hide anything either, because in the end everything is exposed and known by everyone”, explains he.
Notwithstanding, Magro claims that ultimately “consumers are more willing to forgive than what brands think”. “Brands are not consumers’ executives and they are above punctual occurrences, because most of them have overcome such instances in time. However, not managing these crisis could lead to a gradual loss of competitivity”, states the expert.