CNBC’s Jim Cramer remembers the days when kids bought the same brands as their parents, afraid that deviating would mean they were questioning their elders’ judgment.
But now, consumer patterns are suggesting that the exact opposite idea has taken hold.
“Customer loyalty? Hard thing to come by these days,” the “Mad Money” host said. “Now that the internet gives you the ability to comparison-shop for just about anything, younger people just reach for what’s on sale or what can create the most exciting experience. Those choices are roiling the whole market and I think a lot of investors fail to understand their implications.”
When Cramer was younger, he used Old Spice deodorant because his grandfather did, shaved with Gillette because his Pop liked the brand, drove a Ford because Pop drove one and filled his prescriptions at the local drugstore where the employees knew him by name.
Now, everything is fundamentally different. Cramer’s favorite deodorant has too many chemicals, Unilever’s Dollar Shave Club sends razors straight to his doorstep and his local drugstore was replaced by a Walgreens, where nobody knows who he is or, frankly, cares.
Cramer used to shop at the same few stores, occasionally browsing the local mall for bargains or scouring the weekend newspapers for good deals.
Now, people use Google to search for anything under the sun and Amazon to find bargains. A single $24 movie ticket equals three months of Netflix, and cars are growing obsolete to younger people thanks to ride-hailing services like Uber and Lyft.
“In this environment, unless a brand has enough cachet that it’s worth posing with on Instagram … it becomes very difficult to value all sorts of companies,” Cramer said. “That’s why we spend a huge amount of time trying to figure out what certain stocks are worth as this next generation takes over.”
The few companies that have customer loyalty in this day and age are Alphabet (the parent company of Google), Amazon and Facebook, the “Mad Money” host said.
All three use swaths of data to perfect their respective search, retail and creative outlets, giving consumers high-quality platforms to replace newspaper-browsing and window-shopping.
“That’s why FAANG, my acronym for Facebook, Amazon — if I stretch the A, Apple — Netflix and Google, have such staying power,” Cramer said.
People tend to squawk about Apple’s eventual demise, but they talk and text about it on their iPhones, using Apple’s ecosystem in a rare case of brand loyalty, Cramer said.
Cramer added that brand loyalty among consumers is eroding because national chains are reaching a point where they all feel interchangeable.
“At a certain point, national chains start feeling indistinguishable from each other,” he said. “If I put you in a Lowe’s, would you know whether you’re in a Lowe’s or a Home Depot? A Dollar Tree versus Dollar General? Would you know if you’re wearing Nikes versus Adidas? You get the picture.”
But this millennial-driven “homogenization” shouldn’t deter investors from investing in individual stocks, the “Mad Money” host said.
For example, airlines and cruise lines like Carnival and Royal Caribbean transport younger people to the perfect backdrops for their Instagram-documented adventures, Cramer said.
“They like pets, that’s Idexx. They like protein, that’s Tyson Foods. They like restaurants, that’s Yelp. They like trips, that’s Expedia,” he continued.
So as incomprehensible as the younger generations may seem, index funds aren’t the only or best way to play the stock market’s shifting landscape.
“The bottom line: if you’re looking for long-term themes you can fall back on when the market’s unsettled, remember that the baby boomers no longer rule the earth,” Cramer concluded. “The millennials are inheriting it as we speak, and the handful of companies that they like — and they really only like a handful — are the only ones that really benefit from any kind of brand loyalty here. That’s going to be the story for years to come. Get used to it. And if you want to be on the right side of it, I say you better do it now, or else.”