Retailers brace for DEI blowback in lead-up to election, holiday shopping season

Retailers are facing a tough equation as they head into the all-important holiday shopping season — this time over DEI initiatives.

Companies are bracing for blowback related to policies around diversity, equity and inclusion and are hoping to avoid alienating customers who may deem the brands too woke – or not woke enough. Some are tapping outside advisors for advice on how to avoid criticism, while others are opting out of public events on the topic as backlash against equity and inclusion programs grows in the lead-up to the 2024 presidential election. 

CNBC spoke with a number of retail industry insiders, strategists and staffers who spoke on the condition of anonymity to do so candidly.

“There’s a clear sentiment in the retail community that nobody wants to get Tractor Supply‘d,” said one retail industry insider, referring to that company’s decision to walk back a series of DEI initiatives after conservative activist Robby Starbuck criticized the policies online.

“Retailers left to their own devices would like to be very proactive on DEI,” said the person. “But now they don’t want any of their views to be public because they want to be able to sell stuff to everybody, and it’s become such a stupid political issue.” 

The retail industry’s concerns over DEI come after a number of high-profile, consumer-facing companies – including Lowe’s, Tractor Supply, Ford and Molson Coors – walked back some of their equity and inclusion policies in recent months. The changes included ending sponsorships for Pride festivals and cutting ties with the Human Rights Campaign, an LGBTQ+ advocacy group.

Across industries, some companies have also cut positions for DEI roles. Between 2019 and 2022, new jobs for chief diversity and inclusion officers spiked nearly 170%, according to a LinkedIn study, but over the last year, new jobs for such roles have fallen while companies like Google and Meta have cut staffers and downsized programs that fell under DEI.

When explaining their decisions to cut back on DEI, some companies, like Lowe’s, cited the recent U.S. Supreme Court decision that outlawed affirmative action as a catalyst for reviewing their policies. Privately, many retailers are concerned about losing customers and becoming the subject of conservative backlash, industry insiders told CNBC.

Last year, Anheuser-Busch-owned Bud Light and Target faced severe blowback for marketing campaigns and product collections geared toward the LGBTQ community and saw sales fall as a result. As retailers prepare for a potentially less-than-stellar holiday shopping season, they want to ensure they don’t do or say anything that could end up having the same effect.

The growing concern around public DEI efforts, especially during a highly politicized election year, has cast a pall over certain industry events.

In late September, the Retail Industry Leaders Association hosted its annual summit for corporate communications professionals. This year, the event was tied together with RILA’s Diversity Equity & Inclusion Leaders Council, which led some retailers to be concerned about the optics of attending, according to a person who was present and spoke with participants who expressed reservations.

RILA declined to comment.

One former retail executive, who didn’t attend the event but frequently advises publicly traded retailers, said it makes sense that some companies would be concerned about attending because “the optics of it are maybe not so great.”

“The tide is definitely turning against DE&I initiatives,” said the former executive, who spoke on the condition of anonymity so they could do so candidly. “I do think it has a lot to do with the election. … If you’re a CEO and you’re looking at, is [Donald] Trump going to win, or is [Kamala] Harris going to win, and you’re self-serving … then I can see why you need to hedge your bets.”

The person called it a “no-win situation,” especially for major retailers with large customer bases that span both sides of the political spectrum. 

At a top New York City advisory firm, one strategist recently told CNBC that a primary concern facing their retail clients is DEI and how they should be preparing for potential backlash, or how they can avoid it altogether by preemptively walking back certain policies and practices. Some of the discussions included whether to participate in annual gay pride parades and how to communicate any policy changes to staff. 

“Retailers are constantly concerned about what they put out there. I think there’s a higher pressure on them,” said Sonia Lapinsky, head of consulting firm AlixPartners’ global fashion practice. “If you think about the time of year, they’re going into their biggest selling season right now. If we look at a moment in time, the last thing they want to do is potentially upset consumers or generate some bad publicity about what they’re doing or not doing. So they’re highly sensitive and highly concerned.” 

Lapinsky pointed to a recent consumer sentiment survey that AlixPartners published, which showed less than half of millennial consumers considered it very important for a retailer to embody their values in messaging, interactions and marketing. 

“Then we go down from there. So 45% for millennials, less than 40% for Gen Z and Gen X, even though we think we hear Gen Z cares about this, and then boomers was 16%,” said Lapinsky. 

However, that doesn’t mean that retailers shouldn’t be thinking about DEI when it comes to their business strategies, said Lapinsky. 

“If I’m designing a product line or even a service or something like that, and I don’t have kind of a wide representation of people who have been creating that, I think I’m very quickly going to miss the pulse on what my consumer thinks about,” said Lapinsky. “So even if they’re saying they don’t need to see it coming through in messaging, they will need to see it coming through in product that resonates and experiences that resonate and service levels that resonate with them, and that’s going to differ based on who they are and where they come from.”