Retail

The most valuable retail brands lack physical stores

E-commerce produces transformation

Driven by the entrance of Alibaba, the value of the retail category grew 24 percent, tying it with technology as the fastest rising category in the BrandZ™ Top 100 Most Valuable Global Brands.

Chinese e-commerce giant Alibaba qualified for the Top 100 after its IPO and instantly topped the BrandZ™ Retail Top 20, just ahead of Amazon. JD.com, a Chinese e-commerce site that processed 689 million orders in 2014, also entered the BrandZ™ Retail Top 20 for the first time.

Alibaba and Amazon have no physical stores but surpassed Walmart, which operates over 10,000 stores worldwide, and ranks third in the Retail Top 20. This irony illustrates the impact of e-commerce on the radical transformation and rationalization of retail.

The impact is also evident in the churn of brands. Almost half of the BrandZ™ Retail Top 20 brands have changed since the BrandZ™ Top 100 Most Valuable Global Brands report launched 10 years ago.

At that time, consumers expected a trade-off between price, selection and convenience. Now they expect it all – the broad range and sharp pricing of big-format stores, but with more personalized products and service, including greater convenience.

As retail evolves, successful retail brands will remain what they've always been - trusted locations where consumers can access experiences, products and services they want or desire to own – and in the future, may want or desire to rent or share.

Demographic changes, such as aging societies, will influence an expanded offering, which could include, for example: home automation, home monitoring, meal delivery and health care services.

Not every brand will be as broad as Alibaba, Amazon or JD.com, but for successful retailers, technology and brand experience, both physical and virtual, will be as vital as location, and the most successful retailer brands will be integral to the lives of their customers.

Share of life

Because of the rise of e-commerce, combined with demographic trends – smaller households and more urban living – consumers did less shopping with big retailers, and gaining share of life became more important, according to Kantar Retail.

To remain in consideration, retailers adopted a shopper-first attitude, using big data to understand individual shoppers and provide an edited selection and personalized service.

Amazon continued to embed itself deeper into the lives of its customers with programs like Amazon Prime, which builds loyalty with one-day delivery and access to content. Meanwhile, the brand extended into more categories such as fresh food, which it's introduced in several markets.

Similarly, Alibaba not only operated several e-commerce sites, including Taobao Marketplace and Tmall, a third-party platform for brands, but also facilitated transactions through its Alipay app, keeping customers within the Alibaba ecosystem, which also includes banking and other financial services.

A combination of competitive issues, including price competition from dollar stores and other rivals, slowed Walmart's same-sales growth in the US, and sparked the chain's determination to gain greater share of life and reinforce the relevance of the Walmart brand and its “Always Low Prices” promise.

Top 20 Chart

Remaining relevant

Walmart sought lower pricing from vendors and increased employee wages as part of an effort to improve store experience. With over 4,500 locations just in the US, Walmart leveraged its omnipresence by allocating some space to health care clinics, and experimenting with car insurance and other financial services.

Other retail brands with health care clinics included the major drug chains such as CVS and Walgreens. Target also operated health care clinics, which drive shopping trips and increase share of life. It's an area into which certain retailers enjoy consumer permission to expand.

In another initiative to keep its locations and range relevant to changing consumer needs, Target worked to differentiate its grocery department with organic food, craft beer and other products to attract millennial shoppers traditionally drawn to the chain's reputation for urban style at a fair price.

As low grocery prices and convenient location attracted shoppers to food discounters Aldi and Lidl, hypermarkets like Carrefour and Tesco opened smaller stores. Walmart also opened smaller stores under its Neighborhood Market and Walmart Express banners, and experimented with a format called Walmart to Go.

The appearance of 7-Eleven in the BrandZ™ Retail Top 20 for the first time confirms the strength of the convenience trend. The convenience store chain operates 55,000 locations worldwide, including a strong presence in Asia.

Seeking convenience

Macy's, another BrandZ™ Retail Top 20 newcomer, also illustrated the importance of convenience. After several decades competing against category killer specialists, department stores resurged as convenient one-stop emporiums with edited selections across many categories.

Convenience helped drive the success of CVS and Walgreens, which evolved from category-killer drug stores to convenience locations, small enough to easily shop but large enough to offer a wide range that includes not only pharmacy but also grocery.

Even the home improvement category-killers, including Home Depot, pioneer of the DIY warehouse, opened locations about the size of the hardware stores they initially challenged. Lowe's planned two small stores for Manhattan. B&Q, the UK's home improvement leader, subdivided some of its warehouse locations and shared the space with other retailers.

Convenience also explains the development of "click and collect," a popular phenomenon in Europe that enables consumers to purchase online and pick up from outlets often located along their commuting routes.

Concerned that "click and collect" would reduce store visits, US retailers have been slower to adopt it, but Walmart tested a "click and collect" system, having gained expertise from Asda, its UK brand.

Meanwhile, Amazon experimented in Manhattan with a one-hour delivery service called Prime Now. Amazon also introduced the Dash Button, a tool that puts replenishment of key items at the customer's fingertips.

Brand Building Action Points

1.

Hit all the basics. Consumers expect more today, and the store experience really matters. Consumers don't have the patience for long check lines or searching for products on the shelf; they want adequate staffing.

2.

Narrow the gap. Retailers need to narrow the gap between shopper expectations and what they find in stores and online. Consumers don't expect to make a trade-off between price and convenience.

3.

Improve experience. When consumers walk into the physical store or click online, delight them with the immersive brand experience.

10-Year Trends & Analysis

Brand Value balance shifts to online brands

Retail brands rapidly recovered in Brand Value following a slowdown during the recession, with the Brand Value of the Retail BrandZ™ Top 20 category growing 70 percent since 2010, slightly better than the Top 100 overall.

This result includes the arrival of Alibaba, rising straight to the number one rank in this 2015 report. It also reflects how the proportion of value within the Retail Top 10 has shifted dramatically over the last 10 years to online brands.

Online retailers make up more than half the Retail Top 10 value now, compared to a mere 14 percent in 2006. The main casualties have been the mainstream retailers that had over half the value, and now only have less than a fifth.

Over the past 10 years, the Brand Value of online brands increased a massive 645 percent, while specialist brands improved 93 percent in Brand Value and mainstream brands declined 41 percent.

The disruptive force of these developments is reflected in the churn of the retail ranking. Eight brands joined the Top 20 after 2010: 7-eleven, Alibaba, CVS, JD.com, Macy's, Walgreens, Whole Foods, Woolworths. Eight brands dropped out: Asda, Auchan, Best Buy, Kohls, M&S, Safeway, Sainsbury's, Sam's Club. At the same time, certain individual retail brands of various types far exceeded the average brand power score of the Top 100, which is 172, on a scale where the average score for all brands is 100.

The highest scoring online brand in Brand Power is Alibaba (239); specialist - Ikea (289); mainstream - Walmart (217); and discounter - Aldi (149). Brand Power is the BrandZ™ measurement of brand equity.

Online brands dominate in Brand Value

Future View

  • As successful retailers gain a greater share of the consumer's life, consumers will shop at fewer big retailers. To remain in consideration, retailers need to personalize their offerings and service, improve convenience, and provide a compelling and differentiating brand experience.
  • Big data will be critical to understanding individual shoppers and providing a personalized service that edits the product range into a manageable and relevant selection. While there will be fewer big retailers, new start-ups that meet specific needs are likely to appear.
  • Store experience will increase in importance as a place to express the brand. The social aspect of shopping will continue to be important. It needs to work harmoniously with the shopping consumers do online when looking for a wide range and convenience.
  • Mobile will be critical, especially the location-based apps that enable the retailer to interact with the shopper in real time and offer purchasing opportunities that are personalized to fit the shopper's product preferences and budget.

Up 24%


Retail - Top 20 Total Brand Value
$348.1 BILLION


Category Definition
The retail category includes physical and digital distribution channels in grocery and department stores and specialists in drug, electrical, DIY and home furnishings. Amazon appears within retail because it achieves approximately 90 percent of its sales from online retailing.


BrandZ Top 100 2015

BrandZ Global 2014 Report Top 100 Report

Top 100 Chart

Top 100 Infographic


Methodology and valuation by Millward Brown

Share