Products Are Less Unique Than You Think
BY JULIA XIAO '24
Standing in Aisle Three of Market Basket, facing a veritable wall of tomato sauce jars, one realizes that a simple pasta recipe is more difficult than anticipated. Making decisions when shopping online is even worse. Picking a health and wellness product—a moisturizer, a sunscreen—is a guessing game aided by reviews and price. With higher stakes, non automobile aficionados struggle through a sea of brands and customizable options. Although the wide array creates many options, all kinds of products are not individualistic! To follow government guidelines, parent companies house multiple sub brands, leaving customers paralyzed by complicated choices without understanding the social impact of the brands they ultimately choose.
Dubbed the most free market country, the United State’s lack of corporate diversity has a longtime historical origin. For context, a completely hands-off, or laissez faire, approach allows for the rise and fall of dependent companies on the market. These monopolies, or single company dominancies, are problematic: a single company controlling an entire industry can set the prices however they wish. For example, Andrew Carnegie’s monopoly in steel and John Rockefeller’s in oil are well-established examples from the early 1900s. Since then, the US government created guidelines pertaining to market power, regulating how much sway a singular company has in an entire industry.
Although modern customers have freedom to choose products, the government regulations have made conglomerates. A conglomerate is a number of distinct parts or entities that group to form a whole. Rather than full effort in one in one field, the conglomerates of business today have combined multiple different industries in order to follow mandated guidelines, but also to reduce risk and seemingly diversify offerings to increase profitability. For example, the luxury market has five industries: Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry and Selective Retailing. One conglomerate named LVMH holds Louis Vuitton, Dior, Sephora, Tiffany and Co., so it fulfills the regulations because it does not monopolize any single industry. Yet, consumers would not expect the profit from their perfume from Dior and perfume from Sephora to travel to the same owner, and the diversity of purchasing from different brands is lost. In another instance, the Restaurant Brands International is a $5.73 billion revenue holding company with Burger King, Tim Hortons, Popeyes, and Firehouse Subs. Meanwhile, a small local business must have less than $40 million revenue by definition. The popularity of food chains coupled with the relationships between conglomerates creates a large gap in which it is difficult for consumers to support the smaller companies. At the top of the chain, there are fewer companies than the public may think.
Appearing completely separate, consumers can grow loyal to one brand without the negative implications of other brands under that company. In an e-commerce platform’s December 2022 survey of 3,800 global consumers, 65.5% of respondents replied that they tend to loyally buy from the same brand and 35.2% do with cheaper alternatives, indicating the bond between consumers and their preferred brands. A controversy or poor performance in one sector does not harm the well-being of the brands in succeeding sectors. Instead, the parent company can cut-off its toxic branch and continue without reforming its actions. Additionally, consider that conglomerates do not easily disclose that all their products are made by them. For example, as stated in its website, the Volkswagen Group, headquartered in Germany, comprises ten brands, including its namesake of Volkswagen, as well as Audi, Lamborghini, Porsche and Ducati. Each is recognizable as a distinct car brand. After all, there are different quality levels despite being under one conglomerate, and it is true that the branches do operate separately. However, Volkswagen is the majority shareholder of each; overall, parent companies have varying levels of influence in their subsidiaries, usually at least 50% of the voting stock (Investopedia). Therefore, subsidiaries lose control of their unique voices and must follow the parent company’s plan.
Is it okay that the public does not easily know where their dollars are flowing? That parent companies can obscure their social impact? Is it worth it to invest money into supporting giants in each of their respective industries? Regardless of each side’s merits, consumers should not be deprived of the knowledge to consider these questions. Each subsidiary has a social impact of environmental pollution and employment practices, and each company’s voice is more powerful than an individual’s. The government’s efforts towards individuality produces fair prices, but neglects the importance of social impact. Society needs more accessible information on the companies who own labels, so that individuals can pressure companies for their social responsibility, if they so choose.