STATE OF THE RETAIL INDUSTRY:
GENERAL FINDINGS
What’s Inside?. . . . . 4
Executive Summary . . . . . 6
Why Reputation Matters . . . .10
The Return on Reputation Indicator . . . .11
Shaping the Environment . . . .15
Retail Industry Reputation Model . . . .24
Retail Reputation Index . . . .26
Navigating a Path Forward . . . .28
Reputation Matrix . . . .29
About the Study: Methodology . . . .44
About APCO Worldwide & RILA . . . .46
Contents
What’s Inside?
Retail Reputation Index:
The.overall.measure.of.the.industry’s.
reputation.
A.highly.reliable.measure.of.overall.
reputation.for.the.industry.and.individual.
retail.companies.that.ranges.from.0.to.100 ..
The.Reputation.Index.takes.into.account.
how.the.industry.(or.individual.company).is.
rated.along.each.of.the.24.reputation.factors.
in.the.Retail.Industry.Model.and.the.relative.
impact.each.factor.plays.in.defining.reputation .
Retail Reputation Model:
How.we.define.and.measure.retail.
reputation
The.foundation.of.APCO’s.Retail.Return.
on.Reputation.Indicator.is.a.robust.model.
that.measures.the.extent.to.which.all.
stakeholders.believe.the.industry.(and.
individual.retail.companies).are.meeting.
the.unique.and.specific.expectations.they.
have.for.companies.in.the.retail.sector ...
The.model.is.comprised.of.24.key.drivers.
defined.by.40.discrete.attributes.that.were.
measured.in.the.study .
Reputation Matrix:
Plots.a.path.forward.for.protecting..
and.enhancing.reputation
The.Reputation.Matrix.isolates.the.priorities.
for.building.reputation.by.mapping.the.
drivers.that.represent.strengths..
and.weaknesses.against.their.relative.
importance.to.each.stakeholder .
Return on Reputation Indicator:
The.analysis.connecting..
reputation.to.key.outcomes
A.methodology.and.interactive.module.
that.measures.and.depicts.the.relationship.
between.reputation.and.several.key.
outcomes.that.are.critical.to.the.operating.
environment.and.business.success ..
An.interactive.tool.can.be.found.on.
www.rorindicator.com.that.graphically.
demonstrates.the.predicted.impact.of..
moving.the.needle.—.literally.—.on.each..
of.the.key.outcomes .
Executive
Summary
Reputation.depends.upon.meeting.
the.unique.expectations.all.
stakeholders.have.of.an.industry.
or.its.constituent.companies ..
Understanding.these.expectations..
—.and.the.impact.that.meeting.these.
expectations.has.on.the.business.
environment.—.is.key.to.successful.
operation.within.that.environment ..
Managing.reputation.requires.an.
integrated.approach.that.takes.
into.account.the.expectations.of.all.
stakeholders.and.how.this.leads.to.
meaningful.outcomes ..For.example,.
it.is.difficult.to.build.new.stores.and.
grow.if.community.activists.are.rallying.
against.the.idea,.policy-makers.are.
standing.in.the.way,.or.if.the.store.
cannot.attract.and.retain.employees . APCO’s.Return.on.Reputation.(ROR).
Indicator.study.of.the.retail.sector.
was.conducted.among.nearly.10,000.
respondents,.offering.a.360-degree.
view.of.reputation.across.all.
stakeholders,.including.consumers,.
community.activists,.policy-makers,.
retail.employees,.and.investors.and.
analysts ..In.addition.to.understanding.
the.most.important.expectations.
across.these.stakeholders.that.drive.
reputation.for.the.industry.and.
individual.companies,.the.study.
answers.the.critical.question.of.why.
reputation.matters .
The.ROR.Indicator.reveals.that.
reputation.can.increase.consumer.
spending.and.loyalty,.drive.community.
support,.improve.the.support.of.
policy-makers.on.proposals.favorable.
to.the.industry,.help.the.industry.earn.
the.benefit.of.the.doubt.in.the.event.
of.litigation,.engage.employees.in.
ways.that.help.avoid.high.replacement.
costs.and.has.a.tangible.effect.on.a.
company’s.market.capitalization ..
Executive Summary
The.retail.industry.is.beginning.to.show.modest.signs.of.recovery ..However,.consumers.
remain.cautious ..Consumer.confidence.is.improving,.yet.overall.trust.in.companies.
continues.to.decline.while.the.expectations.all.stakeholders.have.of.companies.continue.
to.rise ..Amid.this.complex.and.ever-changing.environment,.the.industry.and.its.major.
companies.need.to.address.the.expectations.stakeholders.have.in.order.to.protect.and.
enhance.reputation.and.ultimately.improve.business.outcomes ..
APCO’s study shows that managing reputation by meeting the ever growing and evolving expectations stakeholders have for companies is more than
a moral responsibility. The ROR Indicator shows us that meeting societal expectations impacts everything from how much consumers spend, to building support on the key policy issues that matter to the industry, to building employee engagement, and ultimately shaping shareholder value.
Margery.Kraus,.Founder.and.CEO,.APCO.Worldwide
Our reputation is arguably the industry’s most important asset. Proactively managing our reputation allows us to keep the lines of communication open with all of our stakeholders so that we can improve the environment in which we operate. We can no longer simply respond to challenges and issues when
they arise, but must work to build a reservoir of goodwill that allows us to engage more effectively and productively over time.
Sandy.Kennedy,.President,.Retail.Industry.Leaders.Association
Specifically, the study measures how reputation can:
•.Lead to greater spending by consumers (increase.annual.
spending.by.the.average.consumer.
by.$133.per.year.for.every.point.
increase.in.the.industry’s.reputation)
•.Mobilize community activists to become your Advocates (add.
an.additional.94,600.community.
activists.who.actively.and.vocally.
advocate.on.behalf.of.the.industry.
for.every.point.increase.in.the.
industry’s.reputation)
•.Increase the level of support among policy-makers on the most important policy issues facing the industry (increase.the.proportion.
of.policy-makers.who.support.the.
industry.on.most.policy.proposals.
by.nearly.a.percentage-point.
for.every.point.increase.in.the.
industry’s.reputation)
•.Gain the benefit of the doubt among Americans when crises arise (add.more.than.six.million.
additional.people.who.are.likely.to.
give.the.industry.the.benefit.of.the.
doubt.for.every.point.increase.in.
reputation)
•.Enhance employee engagement and retention (add.more.than.half.
a.million.retail.employees.who.
are.most.likely.to.remain.on.the.
job.for.every.point.increase.in.the.
industry’s.reputation)
•.Maximize shareholder value and increase market value (increase.
market.capitalization.by.0 .4%,.on.
average,.for.every.point.increase.in.
the.industry’s.reputation)
In.addition.to.demonstrating.
key.outcomes.contingent.upon.
reputation,.APCO’s.ROR.Indicator.
study.for.the.retail.sector.uncovers.
key.strengths.of.the.retail.industry,.
as.well.as.unveiling.critical.
opportunities.to.improve.reputation ..
Meeting the Needs of Shoppers For.all.stakeholder.audiences,.
serving.the.needs.of.shoppers.is.
what.the.industry.does.best.and.is.
critical.to.its.reputation ..Delivering.
high-quality.products.to.consumers,.
particularly.new,.innovative.products.
of.the.future,.is.core.to.defining.the.
industry’s.reputation .
The.value.retailers.offer.their.
customers.not.only.is.key.to.driving.
shoppers.to.the.store,.but.also.shows.
that.the.industry.is.helping.enhance.
our.standard.of.living ..
Despite.recent.headline-grabbing.
issues,.product.safety.emerges.as.
a.strength.of.the.industry.across.all.
audiences ..This.suggests.that.the.
retail.industry.is.meeting.the.product.
safety.challenge.and.weathering.the.
crisis.well.among.all.stakeholders ..In.
fact,.among.investors.and.analysts,.
who.tend.to.prioritize.issues.that.
pose.the.greatest.risk,.product.safety.
is.the.single.most.important.driver ..
Customer.service,.convenience.and.
cleanliness.also.emerge.in.the.study.
as.key.strengths.that.are.important.in.
defining.the.reputation.of.the.industry .
“Giving Back”
Philanthropic.efforts.through.
supporting.local.charities.and.
causes,.donating a share of its corporate profits to charitable
supporting employees to volunteer for charitable causes,.has.a.profound.
impact.in.shaping.the.industry’s.
reputation ..APCO’s.reputation.
research.for.dozens.of.Fortune.
500.companies.in.other.industries.
rarely.finds.philanthropy.to.be.as.
important.as.it.is.for.this.sector ..
Despite.increasing.expectations.
society.has.for.what.companies.are.
expected.to.do.to.give.back,.the.
retail.industry.is.meeting.the.very.
high.expectations.of.stakeholders,.
and.represents.a.core.reputation.
strength ..
Expectations.to.give.back.are.
especially.important.among.
retail.employees ..For.many.retail.
companies,.employees.play.a.very.
important.role.in.giving.back.to.their.
communities.through.employee.
volunteerism.programs ..The.data.
reinforces.that.employees.are.
also.members.of.the.communities.
and.are.often.recipients.of.the.
philanthropic.efforts.by.retailers ..
Philanthropy.can.generate.significant.
pride.in.their.employers.and,.as.a.
result,.plays.a.very.important.role.in.
defining.reputation.that.in.turn.helps.
to.enhance.employee.engagement.
and.recruit.new.employees . Partnering with Communities While.the.industry.is.meeting.
expectations.for.giving.back.through.
its.philanthropic.activities,.the.study.
shows.that.the.industry.still.needs.
to.be.seen.as.a.partner.in.solving.
the.key.issues.facing.communities ..
The.industry’s.most.important.
opportunity.to.enhance.reputation.is.
building ties with local communities and cooperating with local
concerns ..Most.audiences.surveyed.
expect.to.see.retailers.act.in.a.
more.collaborative.and.cooperative.
way.with.local.communities.and.
governments ..Listening.to.the.
community.and.entering.into.a.
dialogue.on.community.concerns.is.
the.top.priority.for.most.audiences.
and.an.area.where.the.industry.has.
yet.to.fully.meet.most.stakeholders’.
expectations . .
Listening.and.collaborating.is.not.
enough,.however ..The.study.shows.
that.the.industry.is.not.yet.meeting.
expectations.for.addressing.land.
use.issues ..On.average,.the.industry.
is.viewed.more.negatively.than.
positively.for.working to ensure that stores take up less land and space ..
Audiences.also.expect.retailers.to.
plan ahead when building stores to reduce traffic and congestion, and build stores that blend into the local community ..Retailers.
are.expected.to.be.leaders.in.
developing.creative.and.innovative.
solutions.to.suburban.sprawl.and.
blight ..Land.Use.is.the.single.most.
important.driver.of.reputation.
among.community.activists,.and.
addressing.these.expectations.is.
critical.to.the.industry’s.ability.to.
mobilize.advocates.on.its.behalf.and.
reduce.the.number.of.vocal.critics.
speaking.out.against.new.stores.and.
the.industry.as.a.whole .
Responsibility to Employees Employment.issues.are.undoubtedly.
one.of.the.most.challenging.issues.
for.the.industry ..Across.all.audiences,.
fair.wages.are.a.fundamental.
expectation.of.the.industry,.yet.one.
that.the.industry.is.not.meeting ..
However,.the.industry.is.seen.more.
favorably.in.the.area.of.providing.
opportunities.for.job.advancement ..
Highlighting.an.industry’s.“success.
stories”.and.emphasizing.the.
chances.an.employee.has.to.move.up.
through.the.ranks.could.help.repair.
perceived.weaknesses.in.wages.
offered ..
Interestingly,.Labor.Relations.(how.
the.industry.is.viewed.in.dealing fairly with employees who wish to unionize).has.very.little.impact.on.the.
industry’s.reputation.for.all.audiences.
except.policy-makers ..The.study.
suggests.that.labor.relations.issues.
have.much.less.impact.than.what.we.
might.expect ..
Environment
Stakeholder.expectations.for.
addressing.environmental.issues.
continue.to.grow.for.all.industries ..
The.study.clearly.shows.that.
environmental.expectations.are.
particularly.important.in.defining.the.
reputation.of.the.retail.sector ..While.
individual.audiences.differ.in.their.
environmental.priorities,.overall.the.
most.impactful.way.to.demonstrate.
environmental.responsibility.is.
through.efforts.to.promote.energy.
efficiency ..The.data.suggests.
an.opportunity.to.build.greater.
awareness.of.the.industry’s.leadership.
in.this.area.to.enhance.reputation . Almost.as.important.as.Energy.
Efficiency.in.demonstrating.
environmental.leadership,.Green.
Products.emerge.as.one.of.the.top.
opportunities.for.building.reputation ..
Despite.recent.efforts.by.some.
retailers.to.promote.green.products,.
the.study.shows.that.there.is.room.for.
improvement.in.communicating.the.
industry’s.leadership ..Demonstrating.
leadership.on.green.products.is.
especially.important.for.policy- makers.and.can.help.to.build.the.
reputation.capital.needed.to.create.
a.more.favorable.policy.environment ..
Employees.also.place.a.high.premium.
on.green.products.when.assessing.
the.reputation.of.the.industry . Although.slightly.less.important.in.
defining.reputation.than.the.other.
environmental.drivers,.the.industry.
is.generally.viewed.as.meeting.
expectations.for.responsible.waste.
and.recycling.practices ..The.industry.
receives.particularly.high.marks.for.
offering recyclable bags ..Addressing.
waste.and.recycling.issues.is.the.
most.important.environmental.
expectation.for.community.activists.
and.a.key.strength.that.should.
be.leveraged.to.mobilize.more.
advocates.on.the.industry’s.behalf .
Using the ROR Indicator to understand the totality of what comprises reputation and how
reputation affects key outcomes will allow the retail industry to be proactive in conditioning
its operating environment in order to realize a real return on reputation equity .
Marketers.have.long.understood.the.
value.and.importance.of.brand.equity ..
An.enormous.amount.of.time.and.
money.is.expended.to.maximize.the.
brand.equity.of.products.and.services ..
Now,.companies.are.embracing.the.
importance.of.their.reputation equity ..
While.brand.equity.is.essential.to.
driving.consumer.behavior,.reputation.
equity.shapes.the.entire.environment.in.
which.companies.operate ..Put.another.
way,.brand.equity.is.focused.on.driving.
outcomes.among.one.stakeholder.
audience.(consumers),.while.reputation.
equity.drives.outcomes.across.all.
stakeholder.audiences ..
Reputation.equity.is.particularly.
important.in.the.retail.sector.since.
stakeholders.interact.with.these.
companies.in.many.more.ways.
than.simply.purchasing.products ..
Retail.companies.have.a.significant.
presence.and.impact.in.communities.
where.people.live,.they.employ.a.
significant.proportion.of.the.overall.
population,.they.partner.with.
suppliers.all.over.the.world.and.
ultimately.provide.consumers.with.the.
products.they.need ..
APCO’s.Return.on.Reputation.
Indicator.study.of.the.retail.industry.
helps.answer.the.critical.questions.
that.can.help.manage.reputation:.
What.are.the.core.drivers.that.define.
the.reputation.of.retailers?.Which.
of.these.drivers.are.most.important.
in.shaping.reputation.for.each.
stakeholder.audience.to.prioritize.
resources.in.managing.reputation?.
What.are.the.key.strengths.that.can.
be.leveraged.to.protect.reputation,.
and.the.key.opportunities.for.
enhancing.reputation?.
However,.the.study.helps.answer.one.
of.the.most.important.questions:.
what.is.the.objective.of.reputation.
management.and.why.does.
reputation.matter?.By.answering.these.
important.questions,.we.can.now.
quantitatively.determine.your.Return on Reputation.equity .
Why Reputation Matters
c o n s u m e r b e h a v i o r
What impact does reputation
have on consumer behavior?
policy environment
What impact does reputation have on driving favorable policy outcomes on specific policy and regulatory
proposals?
litigation environment
What impact does reputation have on leading Americans to give the industry
and companies the benefit of the doubt when
crises arise?
What impact does reputation
have on driving employee retention and
recruitment?
employee e n g a g e m e n t c o m m u n i t y
a c t i v i s m
What impact does reputation have on driving
community support or opposition?
What impact does reputation have on shaping overall market/
shareholder value?
financial v a l u e
Reputation Outcomes
The Return on Reputation
Indicator
APCO’s.Return on Reputation Indicator.is.a.
methodology.to.understand.the.relationship.
between.the.reputation.of.companies.in.various.
industries.and.several.key.outcomes.that.are.critical.
to.their.operating.environment.and.business.success ..
Unlike.other.tools.that.simply.measure.reputation.
across.one.or.two.audiences,.APCO’s.ROR.Indicator.
looks.at.reputation.across.a.broad,.complete.range.
of.all.key.stakeholders,.and.how.reputation.leads.to.
changes.in.behavior.by.each.group ..The.behavior.of.
these.stakeholders.helps.determine.the.operating.
environment.of.companies,.which.in.turn.can.lead.to.
profound impacts on business outcomes ..
The.ROR.Indicator.study.for.the.retail.industry.
collected.data.from.nearly.10,000.respondents.
representing.all.key.stakeholder.audiences,.
measuring.the.role.reputation.plays.in.predicting.
favorable.business.outcomes ..Analysis.of.this.data.
shows.a.statistically.significant.relationship.between.
reputation.and.those.key.business.outcomes ..
The.ROR.Indicator.tool.goes.beyond.tables.and.
charts.to.represent.the.relationship.between.
reputation.and.key.outcomes.in.a.dynamic,.
customizable.way ..An.interactive.tool.can.be.
found.on.www.rorindicator.com.that.graphically.
demonstrates.the.predicted.impact.of.moving.the.
needle.—.literally.—.on.reputation.on.each.of.the.
key.business.outcomes .
The Return on Reputation Indicator
What impact does reputation have on consumer behavior?
SPENDING
For every 1-point increase in Reputation Index, the average consumer will
spend $133.05 more per year
[Margin of error=+/- $25.14]
LOYALTY A 1-point increase in Reputation Index corresponds with an average increase in brand
loyalty of .48% points
[Margin of error=+/- 0.2 percentage-points]
PROMOTERS A 1-point increase in the Reputation Index corresponds with an average 4 percentage
point increase in the number of “promoters”
(consumers who recommend the retailer
to others)
[Margin of error=+/- 0.002 percentage-points]
What impact does reputation have on driving community support or opposition?
ADVOCATES A 1-point increase in the
Reputation Index will lead to approximately 94,600 additional “Retail Advocates” who actively
support the industry
[Margin of error=+/- 9,947]
CRITICS
A 1-point increase in the Reputation Index will lead
to approximately 35,400 fewer “Retail Critics” who
actively oppose the industry
[Margin of error=+/- 7,700]
What impact does reputation have on driving favorable policy
outcomes on specific policy and regulatory
proposals?
A 1-point increase in the Reputation Index corresponds to an average increase of 0.67 percentage
point of policy-makers who support the industry on the
average policy proposal
[Margin of error=+/- 0.22 percentage-point]
What impact does reputation have on leading Americans to give the industry and companies the benefit
of the doubt when crises arise?
A 1-point increase in the Reputation Index will
lead to approximately 6.2 million additional
“defenders” (people who will give the industry the
benefit of the doubt)
[Margin of error=+/- 185,500]
What impact does reputation have on driving employee
retention and recruitment?
A 1-point increase in the Reputation Index will lead to approximately 503,000 additional retail employees
who are highly likely to remain with their employer
for at least a year
[Margin of error=+/- 62,344]
What impact does reputation have on shaping overall market/shareholder
value?
For every 1 point increase in Reputation Index, the average retail company’s market capitalization
increases by 0.4%
[Margin of error=+/- 0.22%]
RetuRn On RePutAtIOn IndICAtOR: MethOdOLOgy
The.ROR.Indicator.begins.with.the.development.of.robust.measurement.models.of.the.reputation.in.individual.industries ..An.industry’s.
model.reflects.the.specific.and.unique.expectations.stakeholders.have.for.that.industry.(see.page.25) ..The.measurement.model.
provides.a.highly.reliable.index.of.the.industry’s.reputation.and.that.of.its.companies.(see.page.27) ..Our.analytic.models.analyze.the.
statistical.relationship.between.the.Reputation.Index.and.key.outcome.variables.which.are.derived.either.from.the.survey.data.or.
from.other.publicly.available.data.sources ..The.predictions.shown.in.the.ROR.Indicator.are.based.on.regression.models.analyzed.from.
observed.data ..As.with.any.regression.model,.the.predicted.outcomes.shown.are.subject.to.the.caveat.of.ceteris.paribus.(assuming.
all.other.variables.except.those.under.immediate.consideration.are.held.constant).and.are.subject.to.multiple.sources.of.known.and.
unknown.error,.including.sampling.error.for.survey.data,.error.as.a.function.of.self-reported.outcomes.and.all.other.sources.of.survey.
error.that.cannot.be.precisely.measured.or.estimated ..Furthermore,.all.measures.of.correlation.(including.regression.analysis).do.not.
imply.causation ..
Details.on.the.models.for.each.dimension.of.the.Return.on.Reputation.Indicator.are.shown.below:
Consumer.Behavior.(Spending):.Linear.regression.model:.y.(Dependent.variable)=Annual.consumer.spending.(self-reported.dollar.
spent.at.individual.retailers);.x1.(Primary.independent.variable).=.Reputation.Index.(of.individual.companies) ..Constant.=.-$4367 .58;.
B.(Reputation.Index).=.$133 .05;.Standard.Error.of.B.(Reputation.Index).=.$25 .14;.p.=. .000 .
Consumer.Behavior.(Loyalty):.Linear.regression.model:.y.(Dependent.variable)=Loyalty.(self-reported.proportion.of.the.time.shopped.
at.each.store.compared.to.other.similar.stores,.scale.from.0-100%);.x1.(Primary.independent.variable).=.Reputation.Index.(of.individual.
companies) ..Constant.=.5 .688;.B.(Reputation.Index).=.0 .481;.Standard.Error.of.B.(Reputation.Index).=.0 .020;.p.=. .000 .
Consumer.Behavior.(Promoters):.Binary.logistic.regression.model:.y.(Dependent.variable).=.Promoter.(0=’Definitely.Would.Not’,.
‘Probably.Would.Not’,.or.‘May.or.May.Not’;.1=’Probably.Would’.or.‘Definitely.Would’.recommend.store.to.friends.or.acquaintances);..
x1.(Primary.independent.variable).=.Reputation.Index.(across.all.companies) ..Constant.=.-2 .936;.B.(Reputation.Index).=. .059;.Exp.B.(∆x.
of.1).(Reputation.Index).=.1 .061;.Standard.Error.of.B.(Reputation.Index).=. .002;.p= .000 .
Community.Activism.(Retail.Advocates):.Binary.logistic.regression.model:.y.(Dependent.variable).=.Advocate.(0=Not.involved.in.any.
of.five.activities.in.the.past.12.months;.1=Involved.in.any.of.five.activities.in.the.past.12.months);.x1.(Primary.independent.variable).=.
Reputation.Index.(across.all.companies) ..Constant.=.-4 .32;.B.(Reputation.Index).=. .0218;.Exp.B.(∆x.of.1).(Reputation.Index).=.1 .022;.
Standard.Error.of.B.(Reputation.Index).=. .002;.p= .000 ..Odds.ratio.applied.to.current.number.of.Retail.Advocates.estimated.based.on.
18 .4%.reported.in.survey.out.of.total.Community.Activist.population.(representing.10%.of.total.U .S ..population.18.and.over.from.most.
recent.Census.data) .
Community.Activism.(Retail.Critics):.Binary.logistic.regression.model:.y.(Dependent.variable).=.Critic.(0=Not.involved.in.any.of.
four.activities.in.the.past.12.months;.1=Involved.in.any.of.four.activities.in.the.past.12.months);.x1.(Primary.independent.variable).=.
Reputation.Index.(across.all.companies) ..Constant.=.-4 .41;.B.(Reputation.Index).=. .0140;.Exp.B.(∆x.of.1).(Reputation.Index).=.1 .014;.
Standard.Error.of.B.(Reputation.Index).=. .003;.p= .000 ..Odds.ratio.applied.to.current.number.of.Retail.Critics.estimated.based.on.10 .8%.
reported.in.survey.out.of.total.Community.Activist.population.(representing.10%.of.total.U .S ..population.18.and.over.from.most.recent.
Census.data) .
Policy.Environment:.Binary.logistic.regression.model:.y.(Dependent.variable).=.Support.for.average.policy.proposal.(0=Not.support.
industry.position.on.an.index.of.support.across.16.different.policy.proposals;.1=Support.industry.position.on.an.index.of.support.
across.16.different.policy.proposals);.x1.(Primary.independent.variable).=.Reputation.Index.(across.all.companies);.Control.for.party.
identification ..Constant.=.-1 .174;.B.(Reputation.Index).=. .015;.Exp.B.(∆x.of.1).(Reputation.Index).=.1 .015;.Standard.Error.of.B.(Reputation.
Index).=. .005;.p= .001 .
Litigation.Environment.=.Binary.logistic.regression.model:.y.(Dependent.variable).=.Defenders.(0=rating.of.0-5.on.10-point.scale.
for.giving.company.the.benefit.of.the.doubt.on.litigation;.1=6-10.on.10-point.scale.for.giving.company.the.benefit.of.the.doubt.on.
litigation);.x1.(Primary.independent.variable).=.Reputation.Index.(of.individual.companies) ..Constant.=.-3 .68;.B.(Reputation.Index).=. .051;.
Exp.B.(∆x.of.1).(Reputation.Index).=.1 .052;.Standard.Error.of.B.(Reputation.Index).=. .002;.p= .000 ..Odds.ratio.applied.to.current.number.
of.Defenders.estimated.based.on.50 .6%.reported.in.survey.out.of.total.U .S ..general.public.18.and.over.from.most.recent.Census.data . Employee.Engagement=.Binary.logistic.regression.model:.y.(Dependent.variable).=.Loyal.Employees.(0=rating.of.0-7.on.10-point.scale.
of.likelihood.of.staying.with.company.for.the.next.12.months;.1=8-10.on.10-point.scale.of.likelihood.of.staying.with.company.for.the.
next.12.months);.x1.(Primary.independent.variable).=.Reputation.Index.(of.individual.companies) ..Constant.=.- .895;.B.(Reputation.Index).
=. .0178;.Exp.B.(∆x.of.1).(Reputation.Index).=.1 .018;.Standard.Error.of.B.(Reputation.Index).=. .002;.p= .000 ..Odds.ratio.applied.to.current.
number.of.Loyal.Employees.estimated.based.on.65 .4%.reported.in.survey.out.of.total.retail.employee.population.from.U .S ..Department.
of.Labor,.Bureau.of.Labor.Statistics.data.(42,815,656) .
Financial.Value=Adapted.Market.Value.of.Equity.Model.(linear.regression.model):.y.(Dependent.variable).=.Market.capitalization.
of.company.at.end.of.2009;.Independent.variables:.xassets.=.Total.assets.at.end.of.2009,.xliab.=.Total.liabilities.at.end.of.2009,.xearn.=.
Abnormal.earnings.at.end.of.2009.(adjusted.for.cost.of.capital),.xRI.=.Reputation.Index.(of.individual.companies) ..Constant.=.$2 .618;.
B.(Reputation.Index).=.$5 .216;.Standard.Error.of.B.(Reputation.Index).=.$2 .846;.p= .064 .
Shaping the Environment:
Reputation’s.Impact.on.
Key.Business.Outcomes
The.recession.of.the.late.2000s.hit.
the.retail.industry.particularly.hard ..
Consumer.confidence.hit.record.
lows ..Increasing.unemployment.and.
slower.wage.growth.left.less.money.in.
people’s.pockets,.resulting.in.a.sharp.
dropoff.in.personal.spending ..
However,.the.economy.seems.to.be.
turning.a.corner ..Same-store.receipts.
from.April.2010.were.up.0 .8.percent.
compared.with.a.2 .7.percent.decline.a.
year.ago,.according.to.the.International.
Council.of.Shopping.Centers.Index.
of.30.retailers ..March’s.9-percent.gain.
was.the.strongest.since.1999 ..Despite.
persistent.high.unemployment.and.
tight.credit,.consumer.confidence.
appears.to.be.rebounding ..
As.many.retailers.cautiously.raise.their.
earnings.outlooks,.the.fundamentals.
may.seem.to.outweigh.corporate.
reputation.in.the.midst.of.this.fragile.
and.uncertain.recovery ..On.the.
contrary,.reputation.has.become.more.
important.than.ever.in.the.struggle.
to.attract.customers ..Because.they.
have.less.money.to.spend,.consumers.
have.greater.and.more.demanding.
expectations.from.the.places.where.
they.shop ..
APCO’s.Return.on.Reputation.
Indicator.shows.that.reputation.has.
a.statistically.significant.impact.in.
three.areas:.how.much.consumers.
are.willing.to.spend,.how.loyal.
they.will.be.to.a.store,.and.how.
likely.they.are.to.be.“promoters”.
recommending.the.store.to.others ..
Thus,.consumers.will.be.more.loyal.
and.spend.more.at.companies.they.
respect.and.admire,.although.the.
frequency.of.shopping.could.not.be.
predicted.in.a.statistically.significant.
way ..What.this.means.is.that.while.
reputation.issues.may.not.get.people.
into.the.store,.reputation.does.drive.
spending ..Extrapolate.the.amount.
of.an.individual’s.increased.spending.
per.year.over.the.spending.of.all.
visitors.to.a.store.and.an.upward.
tick.in.reputation.proves.to.have.a.
substantially.significant.increase.in.a.
company’s.revenue ..
Building.reputation.capital.is.critical.in.
today’s.environment ..Now,.more.than.
ever,.retailers.need.to.maximize.share.
of.wallet,.price.elasticity.and.margins.
as.consumers’.wallets.shrink.and.they.
become.more.deliberative.in.their.
spending.decisions .
Strengthening Customer Relationships:
Consumer.Behavior
What impact does reputation have on consumer behavior?
SPENDING
For every 1-point increase in Reputation Index, the average consumer will
spend $133.05 more per year
[Margin of error=+/- $25.14]
LOYALTY A 1-point increase in Reputation Index corresponds with an average increase in brand
loyalty of .48% points
[Margin of error=+/- 0.2 percentage-points]
PROMOTERS A 1-point increase in the Reputation Index corresponds with an average 4 percentage
point increase in the number of “promoters”
(consumers who recommend the retailer
to others)
[Margin of error=+/- 0.002 percentage-points]
Consumer.behavior.in.and.of.itself.is.
important,.but.it.is.only.one.of.many.
factors.which,.when.synthesized,.
formulate.a.complete.understanding..
of.the.impact.of.reputation ..Community.
activists.are.another.key.stakeholder ..
Community.activists,.defined.as.people.
who.represent.the.top.10.percent.of.
the.most.active.and.informed.segment.
of.the.population,.wield.enormous.
influence.over.the.ability.of.retailers.to.
grow.and.succeed ..These.activists,.who.
are.trend-setters.and.first.adopters,.
are.not.only.communicating.with.and.
influencing.policy-makers.and.other.
decision-makers.but.also.influencing.—.
and.leading.—.the.broader.consumer.
population ..
Community.activists.have.always.
played.an.important.role,.but.their.
influence.is.expanding.with.the.rise.
of.online.communication.and.social.
media ..Indeed,.APCO’s.survey.found.
that.community.activists.are.more.
than.twice.as.likely.to.use.the.Internet.
to.speak.out.on.retail.issues.than.the.
old-fashioned.ways.of.writing.letters.to.
the.editor,.calling.elected.officials.or.
attending.community.meetings .
Mobilizing Advocates:
Community.Activism
What impact does reputation have on driving community support or opposition?
ADVOCATES
A 1-point increase in the Reputation Index will lead to approximately 94,600 additional “Retail Advocates” who actively
support the industry
[Margin of error=+/- 9,947]
CRITICS
A 1-point increase in the Reputation Index will lead
to approximately 35,400 fewer “Retail Critics” who
actively oppose the industry
[Margin of error=+/- 7,700]
Please indicate if you have done any of the following within the past 12 months
Have done in past 12 months Write.a.letter.to.a.newspaper,.
such.as.a.letter.to.the.editor,..
in support.of.a.large.chain.retail.
company
8%
Post.a.positive message.on.
a.blog,.online.forum.or.social.
networking.site.about.a.large.
chain.retail.company.and.its.
activities
12%
Contact.an.elected.official.in support.of.a.large.chain.retail.
company.and.its.activities
5%
Speak.out.at.a.meeting.or.other.
forum.to support having.a.large.
chain.retail.company.in your community
5%
Publicly defend.a.large.chain.
retail.company.when.a.crisis.or.
other.negative.event.occurs 4%
Have done in past 12 months Write.a.letter.to.a.newspaper,.such.
as.a.letter.to.the.editor,.criticizing.
the.activities.of.a.large.chain.retail.
company
5%
Post.a.critical or negative message.on.a.blog,.online.forum.
or.social.networking.site.about.a.
large.chain.retail.company.and.its.
activities
8%
Contact.an.elected.official.to criticize.a.large.chain.retail.
company.and.its.activities 5%
Speak.out.at.a.meeting.or.other.
forum.to oppose having.a.large.
chain.retail.company.in your community
5%
Retail Advocates
Taken Any Action – 18%
(~4,293,180.community.activists)
No Action – 82% No Action – 89%
Retail Critics
Taken Any Action – 11%
(~2,519,910.community.activists)
The.good.news.for.retailers.is.that.
there.are.more.people.who.are.
vocally.advocating.on.behalf.of.the.
industry.“Retail.Advocates”.than.are.
vocally.criticizing.it.“Retail.Critics .”.
Currently,.18.percent.of.community.
activists.have.advocated.on.behalf.of.
the.industry.over.the.past.12.months,.
while.only.11.percent.have.actively.
criticized.the.industry ..Moreover,.there.
are.nearly.twice.as.many.potential.
advocates.(who.say.they.are.likely.to.
speak.out.on.the.industry’s.behalf.in.
the.future.–.38.percent).compared.
to.potential.critics.(who.say.they.
are.likely.to.speak.out.against.the.
industry.in.the.future.–.21.percent) ..
Interestingly,.Retail.Advocates.
and.Retail.Critics.have.very.similar.
demographic.profiles ..So.what.
determines.whether.someone.will.
become.an.ardent.supporter.or.an.
active.opponent.in.the.public.arena?.
Reputation ..The.reputation.of.retail.
companies.is.a.significant.predictor.of.
whether.or.not.someone.becomes.an.
active.Advocate.or.Critic ..The.Return.
on.Reputation.Indicator.shows.how.
incremental.changes.in.the.average.
retailer’s.Reputation.Index.can.
increase.the.number.of.Advocates.
that.are.helping.retailers.achieve.
their.goals.or.increase.the.number.of.
Critics.who.make.it.harder.for.retailers.
to.get.their.messages.across,.to.
influence.the.local.policy.environment.
and.to.grow.by.building.new.stores.
in.local.communities ..Furthermore,.
reputation.mobilizes.advocates,.
moving.people.from.a.position.of.
apathy.to.taking.action .
Who are these retail activists?
Community activists come from all walks of life and all levels of the socioeconomic continuum; they are demographically quite similar to the rest of the general public. What
distinguishes — and defines — this audience is a high level of attentiveness to news and information and active involvement in civic and political activities. APCO Insight has been
conducting research to understand and profile community activists over the past 10 years. Community activists get news every day either from print or online, regularly vote in elections, express high levels of interest in public policy and have been involved in some civic or political activity (e.g.
contacted a public official to express views, written letters to the editor, or volunteered for political campaigns, community or nonprofit organizations)
The survey found some interesting differences between Retail Activists (both Advocates and Critics) and general community activists. The chart on the right compares the demographic profile of community activists generally and Retail Advocates and Retail Critics.
•.Retail.Activists.are.more.likely.to.be.men.(especially.Retail.
Critics).than.the.typical.community.activist .
•.Both.Retail.Advocates.and.Critics.are.younger.than.the.
typical.community.activist .
•.Both.Retail.Advocates.and.Critics.are.less.likely.to.identify.
with.one.of.the.major.parties.and.are.more politically independent.than.the.average.community.activist ..
•.Retail.Critics.tend.to.be.higher income .
•.Retail.Activists.—.both.Advocates.and.Critics.—.are.more likely to be an ethnic minority.—.particularly hispanic.—.
than.general.community.activists .
Retail Activists
g e n d e R
Community Activists
55% 45%
Advocates
58% 42%
Critics
63% 37%
A g e
18-24 9%
18% 16%
25-34 15%
23% 30%
PA R ty
Republican 30% 27% 25%Democrat 39% 37% 40%
Independent/Other 31%
36% 36%
35-44 18% 20% 18%
e t h n IC It y
White/Caucasian 76% 69% 65%Black/African-American 10% 11% 9%
Hispanic/Spanish/Latino 11%
17% 22%
Other 3% 3% 3%
45-54 19% 16% 14%
55-59 9% 5% 7%
60-64 8% 6% 6%
65+ 23% 12% 8%
In C O M e
Under.$20,000 10% 10% 8%
$80-$100,000 11% 10% 10%
$20-40,000 23% 26% 30%
$100-150,000 11% 11%
16%
$40-60,000 23% 22% 17%
$150,000+ 4% 5% 6%
$60-80,000 18% 16% 14%
Just.as.corporate.reputation.affects.
and.mobilizes.community.activists,.
it.also.plays.a.significant.role.in.
shaping.the.policy.and.regulatory.
environment ..APCO’s.research.over.
the.past.10.years.has.demonstrated.
the.impact.reputation.has.in.gaining.
the.support.of.policy-makers.and.
regulators.on.issues.that.can.mean.
the.difference.between.success.or.
failure.for.the.industry ..
On.average,.44.percent.of..
policy-makers.support.the.positions.
of.the.retail.industry ..When.controlling.
for.party.affiliation,.the.Retail.
Reputation.Index.has.a.statistically.
significant.impact.in.driving.support.
for.policy.outcomes.critical.to.the.
industry’s.success .
Shaping Policy Outcomes:
The.Policy.Environment
Supporters – 44%
Opposers – 66%
Proportion of policy-makers who support the industry on the average policy proposal
What impact does reputation have on driving favorable policy
outcomes on specific policy and regulatory
proposals?
A 1-point increase in the Reputation Index corresponds to an average increase of 0.67 percentage
point of policy-makers who support the industry on the
average policy proposal
[Margin of error=+/- 0.22 percentage-point]
The data suggests that if the industry were to improve its reputation by
9 points among policy- makers (on a scale from
0 to 100), the industry could gain majority support
on most policy issues.
•. Labor
•. Oppose.the.Employee.Free.Choice.
Act
•. Oppose.the.Healthy.Families.Act
•. Oppose.local.laws.mandating.certain.
levels.of.health.care.benefits.to.
employees
•. Oppose.passage.of.RESPECT.Act
•. Online Sellers
•. Support.legislation.to.tighten.
regulations.for.online.auctions.sites
•. Support.Federal.legislation.granting.
states.authority.to.collect.sales.taxes.
on.remote.(Internet).sites
•. Taxes
•. Oppose.a.national.sales.tax
•. Support.permanent.extension.of.the.
Work.Force.Opportunity.Tax.Credit
•. Land Use
•. Oppose.local.regulation.that.limits.the.
square.footage.of.new.stores
impact.statements.prior.to.receiving.
building.permits
•. Environmental Restrictions
•. Oppose.local.laws.banning..
non-compostable.plastic.bags
•. Oppose.local.laws.requiring.retailers..
to.sell.reusable.bags
•. Marketing
•. Oppose.state.laws.requiring.third-party.
advertisers.to.provide.consumers.notice.
on.type.of.information.collected.and.
the.methods.for.consumers.to.opt-out
•. Civil Justice Reform
•. Support.procedural.limits.and.cap.the.
awards.of.civil.lawsuits
•. Trade
•. Support.free.trade.agreements
•. Credit Card Reform
•. Support.reforms.on.interchange.credit.
The.ROR.Indicator.polled.the.position.of.local,.state.and.federal.policy-makers.
on.key.issues,.including*:
Building.reputation.capital.is.like.
putting.money.in.the.bank ..In.good.
times,.interest.grows;.in.times.of.
crisis,.it.gives.the.ability.to.draw.
down.the.deposit.without.draining.
the.account ..Research.conducted.
by.APCO.to.help.companies.
communicate.on.litigation.shows.
a.direct.relationship.between.a.
company’s.reputation.and.how.
people.evaluate.lawsuits ..In.fact,.
a.company’s.reputation.is.often.a.
stronger.predictor.of.how.people.
view.a.lawsuit.than.any.arguments.or.
merits.of.the.case ..A.good.reputation.
gives.the.company.the.benefit.of.the.
doubt,.which.is.an.invaluable.asset.
when.facing.litigation.or.other.crises ..
Reputation.capital.proves.critically.
important.in.a.company’s.ability.to.
weather.crises ..
APCO’s.Return.on.Reputation.
Indicator.shows.a.direct.relationship.
between.retailers’.reputation.and.
whether.Americans.will.grant.retailers.
the.benefit.of.the.doubt ..The.
survey.indicates.51.percent.of.the.
population.is.likely.to.give.retailers.
the.benefit.of.the.doubt.when.the.
companies.are.facing.litigation ..
The.data.suggests.that.a.1-point.
increase.in.the.Retail.Reputation.
Index.could.increase.that.percentage.
of.“defenders”.to.53.percent.(which.
translates.into.approximately.6 .2.
million.additional.Americans.willing.
to.give.the.industry.the.benefit.of.the.
doubt) ..That’s.reputation.capital.you.
can.take.to.the.bank .
Managing Risk:
The.Litigation.Environment
How likely would you be to give the retail industry the benefit of the doubt?
Neutral – 30%
Defenders – 51%
(~118,062,439.Americans)
Doubters – 17%
Scale.from.0-10;.0-4=Doubters;..
5=Neutral;.6-10=Defenders
What impact does reputation have on leading Americans to give the industry and companies the benefit
of the doubt when crises arise?
A 1-point increase in the Reputation Index will
lead to approximately 6.2 million additional
“defenders” (people who will give the industry the
benefit of the doubt)
[Margin of error=+/- 185,500]
Becoming an Employer of Choice:
Employee.Engagement.and.Recruitment
Reputation.affects.not.just.external.
environments,.such.as.public.policy.,.
but.also.internal.constituencies ..Any.
human.resource.professional.can.
attest.to.the.growing.cost.associated.
with.recruiting.and.replacing.
employees ..The.SASHA.Corporation,.
an.HR.consulting.firm,.found.that.
replacing.an.$8.per.hour.employee.
can.cost.a.company.anywhere.from.
$3,500.to.$25,000.per.employee ..The.
HR.consulting.firm.Saratoga.shows.in.
its.Human.Resource.Financial.Report.
that.the.average.turnover.cost.equals.
one.year’s.salary.and.benefits.and.is.
even.higher.for.retailers ..Even.in.an.
environment.of.high.unemployment,.
the.cost.to.replace.employees.is.a.
significant.financial.burden ..As.the.
economy.expands.and.retail.sales.
improve,.these.costs.will.continue.to.
rise .
APCO’s.survey.of.retail.employees.
finds.that.35.percent.of.all.employees.
are.not.very.likely.to.remain.with.
their.employers.beyond.the.next.
12.months ..There.are.many.ways.to.
improve.employee.retention,.but.the.
survey.finds.that.reputation.can.play.
a.significant.role ..Retail.employees.
care.a.great.deal.about.a.number.of.
factors.when.assessing.the.reputation.
of.the.companies.for.which.they.work,.
including.how.their.employers.give.
back.to.the.community,.demonstrate.
leadership.on.environmental.issues.
and.incorporate.free.trade.practices.
(see.page.42) .
APCO’s.Return.on.Reputation.
Indicator.shows.a.statistically.
significant.relationship.between.
the.reputation.of.a.retailer.and.its.
employees’.likelihood.of.remaining.
with.the.company.for.at.least.the.
next.12.months ..The.data.suggests.
that.for.every.1-point.increase.in.
the.Retail.Reputation.Index,.the.
number.of.employees.who.are.most.
likely.to.remain.with.the.company.
increases.by.nearly.two.percentage.
points ..This.could.lead,.on.average,.
to.approximately.503,000.additional.
retail.employees.who.are.most.likely.
to.stay.on.the.job .
How likely are you to stay at the retail company you currently work at for the next 12 months?
Very Likely Somewhat Likely Neutral Somewhat Unlikely Very Unlikely Loyal Employees – 65%
(~28,001,439.retail.employees)
What impact does reputation have on
driving employee retention and
recruitment?
A 1-point increase in the Reputation Index will lead to approximately 503,000 additional retail employees
who are highly likely to remain with their employer
for at least a year
[Margin of error=+/- 62,344]
As.indicated.earlier,.corporate.
reputation.plays.a.prominent.role.in.
improving.the.overall.environment.in.
which.companies.conduct.business,.
including.improving.the.policy.
landscape,.reducing.litigation.risk,.
attracting.and.retaining.high-quality.
employees.and.building.stronger.
loyalty.among.consumers ..It.should.
come.as.no.surprise.then.that.there.
is.a.significant.relationship.between.
corporate.reputation.and.the.financial.
value.of.a.company ..
Hundreds.of.articles.in.academic.
literature.have.evaluated.the.
relationship.between.corporate.
reputation.and.financial.outcomes,.
such.as.profitability.and.valuation ..
The.vast.majority.of.peer-reviewed.
studies.conclude.that.there.is.a.
statistically.significant.positive.
relationship.between.corporate.
reputation.and.financial.performance ..
For.instance,.an.analysis.of.Fortune’s.
Most.Admired.Corporations.ratings.
and.data.on.financial.performance,.
including.firm.profitability.(return.on.
total.assets),.market-to-book.value.
and.firm.size.(total.sales).has.shown.
that.“firms.with.better.corporate.
reputations.are.better.able.to.sustain.
superior.financial.performance.over.
time…[and].good.reputations.help.
poor.performing.firms.in.their.efforts.
to.return.to.profitability .”1.
Many.studies.also.have.demonstrated.
the.relationship.between.reputation.
and.stock.market.performance ..One.
study.evaluated.the.relationship.
between.the.Fortune.Most.Admired.
Companies.rankings.and.security.
prices.in.the.year.following.the.
publication.of.the.rankings ..Over.a.
13-year.period,.the.10.corporations.
at.the.top.of.the.rankings.showed.an.
average.increase.of.20 .1.percent.in.
stock.price.over.the.year.following.
the.publication.of.the.rankings,.while.
the.average.increase.in.the.S&P.500.
was.only.13 .1.percent ..On.the.other.
hand,.the.10.firms.at.the.bottom.
of.the.rankings.showed.an.average.
decline.in.stock.price.of.1 .9.percent .2. APCO’s.Return.on.Reputation.Indicator.
narrows.in.on.the.return.on.market.
equity.that.can.be.generated.from.the.
reputation.of.retailers ..The.data.across.
17.top.retailers.shows.a.statistically.
significant.“reputation.premium”.in.
market.capitalization ..When.applying.
a.Market.Value.of.Equity.econometric.
model.that.includes.APCO’s.Retail.
Reputation.Index.as.an.independent.
variable,.we.see.that.reputation.can.
help.predict.market.capitalization.of.
retail.companies ..For.the.average.
retailer,.the.data.shows.that.a.1-point.
increase.in.the.Retail.Reputation.
Index.can.lead.to.approximately.
a.0 .4.percent.increase.in.market.
capitalization ..
Enhancing Shareholder Value:
Investment.Decisions.and.Market.Value
What impact does reputation have on shaping overall market/shareholder
value?
For every 1-point increase in Reputation Index, the average retail company’s
market capitalization increases by 0.4%
[Margin of error=+/- 0.22%]
1 .. Roberts.and.Dowling.(2002) ..Corporate.Reputation.and.Sustained.Superior.Financial.Performance ..Strategic Management Journal,.Vol ..23;.1077-1093 ..
2 .. Vergin.and.Qoronfleh.(1998) ..Corporate.Reputation.and.the.Stock.Market ..Business Horizons,.January-February.1998;.19-26 .
Retail Industry Reputation
Model
The.foundation.of.APCO’s.Retail.
Return.on.Reputation.Indicator.is.
a.robust.model.that.measures.the.
extent.to.which.all.stakeholders.
believe.the.industry.(and.individual.
retail.companies).are.meeting.the.
unique.and.specific.expectations.
they.have.for.companies.in.the.retail.
sector ..The.Retail.Industry.Reputation.
Model.allows.us.not.only.to.measure.
reputation.—.and.the.return.on.
reputation.equity.—.but.also.to.provide.
a.roadmap.for.how.to.most.effectively.
protect.and.enhance.reputation ..
By.understanding.how.the.industry.
and.companies.are.viewed.on.each.
of.the.discrete.drivers.of.reputation,.
and.the.relative.impact.these.drivers.
have.in.shaping.overall.reputation,.
the.Return.on.Reputation.Indicator.
prioritizes.the.most.important.
strengths.to.be.leveraged.and.
the.most.important.opportunities.
for.further.enhancing.reputation ..
Recognizing.that.reputation.is.defined.
by.multiple.stakeholders.who.each.
play.an.important.role.in.shaping.the.
outcomes.that.drive.success.or.failure,.
the.research.charts.a.path.forward.
for.enhancing.reputation.by.each.
audience ..By.focusing.on.the.most.
important.drivers.for.each.audience,.
the.industry.can.enhance.reputation.
in.order.to.realize.a.real.return.on.
reputation.equity .
Retail Industry Reputation Model:
Defining.Reputation.&.Understanding.
Stakeholder.Expectations
THE RETAIL INDUSTRY REPUTATION MODEL: METHODOLOGY
The.Retail.Industry.Reputation.Model.was.informed.by.extensive.research.over.the.past.six.years.to.isolate.the.key.drivers.that.define.the.retail.industry’s.reputation ..APCO.
Insight.conducted.extensive.qualitative.research.(focus.groups.and.in-depth.interviews).to.understand.the.unaided.expectations.audiences.have.for.retailers.to.be.viewed.as.
respected.and.responsible.companies.(in.their.own.words) ..
Quantitative.surveys.were.conducted.to.test.more.than.100.different.attributes.uncovered.in.the.qualitative.research ..Using.advanced.statistical.analyses,.including.both.exploratory.
and.confirmatory.factor.analysis.procedures.and.Structural.Equation.Modeling,.APCO.Insight.identified.24.dimensions.(factors).that.define.perceptions.of.retail.companies ..
Correlations.between.the.24.discrete.factors.show.that.there.are.four.broad.dimensions.of.reputation:.Responsibility.to.Customers,.Responsibility.to.Communities,.
Responsibility.to.Employees.and.Suppliers,.and.Responsibility.to.Investors ..The.analysis.also.isolated.the.40.discrete.attributes.that.provide.the.most.valid.and.reliable.
metrics.of.these.underlying.factors ..The.Retail.Industry.Reputation.Model.provides.a.highly.reliable.and.robust.measurement.tool.to.assess.the.reputation.of.the.industry.and.
individual.retail.companies.that.reflect.the.specific.and.unique.expectations.stakeholders.have.for.retail.companies .
Retail
Reputation
Index
The.retail.industry,.overall,.recorded..
a.Reputation.Index.of.56 .6.across..
all.stakeholders ..The.Reputation..
Index.is.slightly.higher.than.the..
mid-point.(50 .0),.which.suggests.that.
the.industry.is.just.barely.meeting.the.
expectations.of.most.stakeholders.
and.demonstrates.that.there.is.
significant.room.for.improvement ..
When.compared.to.other.industries,.
the.retail.industry’s.reputation.is.
right.in.the.middle:.neither.among.
the.most.reputable.industries.(such.
as.computers.and.technology),.nor.
among.the.least.reputable.industries.
(such.as.oil,.health.insurance.or.
tobacco) ..The.Index.is.computed.
separately.for.each.stakeholder ..By.
audience,.the.Index.is.the.lowest.
among.employees.at.54 .0.and.highest.
among.community.activists.at.58 .6 ..
The.Index.among.policy.leaders.was.
56 .1,.among.financial.leaders.57 .3.and.
among.consumers.57 .8 .
The.real.value.of.the.Index.is.that.it.
provides.a.statistically.valid.measure.
of.reputation.overall.and.by.each.key.
stakeholder.that.can.be.tracked.over.
time.to.determine.the.effectiveness.
of.various.industry.initiatives.and.
communication.efforts .
Retail Reputation Index:
Measuring.Retailer.Reputation
RETAIL REPUTATION INDEx: METHODOLOGY
The.Reputation.Index.is.a.highly.reliable.index.of.reputation.for.the.industry.and.individual.retail.companies.that.ranges.from.0.to.100 ..The.Reputation.Index.takes.into.account.
how.the.industry.(or.individual.company).is.rated.along.each.of.the.24.reputation.factors.in.the.Retail.Industry.Model.and.the.relative.impact.each.factor.plays.in.defining.
reputation ..The.Reputation.Index.is.derived.from.the.sum.of.the.Performance.Scores.for.each.of.the.24.factors.in.the.Retail.Industry.Reputation.Model,.where.individual.
Performance.Scores.are.weighted.by.the.factor’s.respective.Impact.Score.(as.described.on.page.30) ..The.Reputation.Index.is.computed.separately.for.each.audience.and.can.be.
used.to.compare.reputation.among.audiences.and.track.reputation.over.time .
0 100
Employees 54 .0
0 100
Total Reputation Index 56.6
0 100
Policy Leaders 56 .1
0 100
Financial Leaders 57 .3
0 100
Consumers 57 .8
0 100
Community Activists 58 .6
The.Retail.Industry.Reputation.Model.
shows.that.all.audiences.define.
retailers’.reputation.as.the.extent.to.
which.the.industry.takes.responsibility.
for.addressing.specific.issues.and.
concerns.in.four.areas:.Responsibility.
to.Customers,.Responsibility.to.
Communities,.Responsibility.to.
Employees.and.Suppliers,.and.
Responsibility.to.Investors ..Within.
each,.the.model.captures.the.specific.
reputation.drivers.that.reflect.the.
expectations.stakeholders.have.for.
the.sector ..The.study.measures.the.
proportional.impact.of.each.of.these.
core.dimensions.of.reputation . The.research.shows.that.community.
issues.are.equally.important.in.
defining.retailers’.reputation.as.
customer-focused.attributes.and.
expectations ..Each.accounts.for.
36.percent.of.the.industry’s.overall.
reputation ..So.while.delivering.
the.highest.quality.products,.
customer.service.and.customer.
experience.is.absolutely.critical.to.
a.retailer’s.reputation,.addressing.
key.community.concerns.is.just.
as.important.in.protecting.and.
enhancing.reputation .
Next.in.importance.is.the.industry’s.
responsibility.to.its.employees.and.
suppliers,.which.represents.nearly.19.
percent.of.the.industry’s.reputation ..
Employment.issues.are.especially.
important.in.defining.reputation.
for.policy.leaders.(representing.
23.percent.of.overall.reputation) ..
Even.among.retail.employees,.
the.view.of.retailers.is.primarily.
driven.by.how.the.industry.and.
individual.companies.work.to.meet.
expectations.of.the.communities.and.
consumers.they.serve .
Investor.issues.related.to.Financial.
Strength,.Governance.and.Executive.
Compensation.play.a.much.smaller.
role.in.defining.reputation.(9.percent.
across.all.audiences) ..Even.among.
investors.and.analysts,.these.issues.are.
secondary.to.the.extent.to.which.the.
industry.is.meeting.its.responsibility.
to.customers,.communities,.and.
employees.and.suppliers .
Navigating a Path Forward
Core Reputation Drivers:
Proportional Impact in Shaping Reputation
Consumers Community
Activists Policy
Leaders Financial
Leaders Employees
35% 35% 38% 42% 33%
Responsibility to Customers
36%
Responsibility to Communities
36%
Responsibility to Employees
& Suppliers 19%
Responsibility to Investors
9%
Retail Industry Reputation
