Brand disasters aren't the same as business disasters.

Business disasters are transitory problems from which companies can easily recover. For example, a series of bad quarterly results is a business disaster, but the disaster becomes moot after you clock a couple good quarters.

Brand disasters are events that cause customers to no longer trust you. For example, if your product becomes responsible for numerous highly-publicized deaths, your existing customers will jump ship, and potential customers will be all "I don't think so..."

Last month, I identified Boeing's 737 MAX crashing-on-takeoff scandal as a brand mega-disaster because it's created a general impression that something is fundamentally wrong at Boeing and that therefore their products can't be trusted. That's an albatross they might never shed.

Similarly, the Wells Fargo fake account scandal fundamentally changed how the public perceives the brand. Where the brand originally said "solid, American, and trustworthy," it now says "Gee, do I really want to trust my money with these shady characters?" Again, this is likely to prove a very difficult brand image to change or improve.

Unlike business disasters (which can result from bad luck) brand disasters emerge from the corporate culture. At Boeing, for instance, the culture changed from "safety first" to "cost-savings first." At Wells Fargo, it changed from "serve the customer" to "sell, Sell, SELL!"

While brand disasters can happen in any industry, they're more serious and long-lasting inside industries where there's a big downside risk to working with an untrustworthy partner, like aircraft manufacturing, banking, accounting, and pharmaceuticals.

And that's why the Amazon brand may be headed for disaster.

The Amazon brand established itself by selling a product--books in print--where the manufacturers (the book publishers) do their own quality control. Customers knew that when they bought from Amazon, they'd get what they paid for.

In addition, buying a book has virtually no downside risk to the customer, other than perhaps discovering, post-purchase, that it was written by Danielle Steel.

All kidding aside, Amazon developed an enviable brand reputation as a trustworthy source for a quality product, a reputation that it built upon as the company branched out into additional product categories.

However, Amazon has recently been sacrificing its brand reputation by allowing third-party sellers to offer poor-quality products. According to the public interest group Pro Publica:

"[Our] investigation found 4,152 items for sale on Amazon.com's site that have been declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators -- items that big-box retailers' policies would bar from their shelves [including] at least 2,000 listings for toys and medications lacked warnings about health risks to children."

Amazon justifies substandard products on its site in a manner similar to how social media sites justify distasteful content--that they're just a platform and therefore not responsible, as long as they remove anything that violates their terms of service.

The problem is that Amazon.com has always positioned itself as a store rather than, say, a flea market. As such, customers may feel that Amazon should guarantees the goods it sells in the same way that brick and mortar stores guarantee the goods they sell.

Put another way, if a product being sold on Amazon.com starts killing people, they public is likely to blame Amazon rather than the supplier.

To make matters more potentially difficult for Amazon, the company has gained a reputation as an employer that doesn't value its workers. For example, Amazon has been plagued by stories of mistreatment of warehouse workers and was recently accused of giving insufficient safety training to its delivery drivers.

All of these brand image problem apparently stem from Amazon's focus on growth at any cost, even if that cost might the erosion of public trust. But that's just the start.

Amazon is also a major player in cloud computing (which accounts for 50 percent of the company's profits) and an increasingly important player in the grocery industry--both of which are especially dependent upon maintaining the trust of their customer base.

Any widely-publicized scandal in those areas, piled atop Amazon's already increasingly sketchy brand image, risks permanent brand damage. It may be only a matter of time before I end up including Amazon in my yearly brand disaster list.

Published on: Jan 3, 2020
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