What people think about when they focus on retail innovation is the tech side of the business — next-generation marketing tools, cutting-edge last mile vehicles, frictionless checkout — but there is still plenty of innovation happening in the more foundational strategies of running a retail business. Fordham University’s American Innovation Index (Aii) follows the logic that customers are the real judges of innovation — and if an innovation doesn’t matter to them, it won’t impact their buying behaviors.
“What makes this index different is that it is a national barometer of customer-perceived retail innovation and social innovation,” said Lerzan Aksoy, Interim Dean and Professor of Marketing at Fordham University’s Gabelli School of Business in an interview with Retail TouchPoints. “There are a lot of indices out there that look at how much you’re spending on R&D, or how much you’re spending on people and hiring,” but the Aii stands out with its focus on shopper perception.
The Aii, which covers 186 companies across 20 industries, is based on results of a survey of more than 7,000 consumers for a shopper’s-eye view of which retailers are the most innovative. Its sister study, the Social Innovation Index (Sii), looks at how consumers perceive companies’ impact on society, such as their sustainability initiatives — and not every retailer’s Aii score lines up with their Sii score.
Apple Leads on Innovation, but Falls Short on Social Issues
Apple is the standout retailer in the study — its Aii score of 84.2 is not only the highest among retailers but the highest in the survey. Shoppers’ high opinion of Apple is due to the breadth of its offerings, according to Lerzan. The products themselves are synonymous with cutting-edge consumer goods, and its entire structure is focused on staying ahead of customer trends and providing experiences so intuitive that they set the standard for its customers.
“I would say that what makes Apple notable is clearly its design and the ability to really do research and development that is continuous, and offering innovative products into the marketplace,” said Aksoy. “But that’s not the only thing it does. I think it also does a really good job of being able to integrate across different platforms and make it a seamless experience for the consumer.”
However, Apple’s Sii score of 68.9 keeps it out of the list of most socially conscious companies. This isn’t necessarily a problem for Apple, but it’s a sign of where its priorities lie — and an opportunity for competitors to stand out in an area where the tech giant is at its weakest.
IKEA’s Messaging Resonates with its Audience
A retailer effectively leveraging its reputation for both innovation and sustainability is IKEA, according to Aksoy. The retailer ranked third among all companies with its Aii score of 83.7, and likewise stood strong in terms of sustainability with its Sii score of 77.2.
“When we look at the value proposition of IKEA, it really is this affordable furniture that you use to start off your home,” said Aksoy. “When you look at the main target market and segment of IKEA, they’re usually younger, and the younger segment is usually in a segment that cares most about this. They certainly are catering to a group that really cares about sustainability.”
Macy’s Scores High With Social Investments
One retailer where shoppers have a potentially better-than-expected score is Macy’s. Its Aii of 78.8 was the fifth-highest among all general merchandise retailers, beaten only by Amazon (78.8), Costco (77.3), eBay (76.7) and Nordstrom (also 76.7). The department store was ahead of Target (70.8) and Walmart (67.6), and its Sii of 67 also put it in the top four for this category.
“One of the things that Macy’s has done is Mission Every One, which is committed to this brighter, more sustainable future for all,” said Aksoy. “It’s really made these more long-term innovation and sustainability goals. It’s been putting a lot into circularity throughout its value chain. It’s also done a lot in terms of reducing waste and this idea of reduce, reuse, recycle.”
Put Innovation in Understandable Terms to Drive Success
Positive brand perception alone isn’t enough for success. Retailers like Macy’s need to put in the effort to turn that positive halo into a solid value proposition that makes consumers want to shop with them, rather than simply appreciate them.
“You have to really be doing storytelling and helping people understand what the innovation that you’re doing means to your consumer, their life and what they care about on a day-to-day basis,” said Aksoy. “I think companies that are really good at being able to convey that and do well on this sustainability piece are the ones that are succeeding.”
Aksoy suggested making sustainability-focused messaging specific and relevant to your shoppers: “For example, if you’re talking about carbon emissions, what does that mean for my good as a consumer?” she said. “When you say net-zero, what does that mean for me and my life?”