Global economy and e-commerce reshaped retail

Retailers struggled with two powerful forces—the economy and rapidly changing e-commerce.

Demand in fast growing markets helped drives sales for many global retail brands. But Eurozone uncertainty negatively impacted business. And results in the US were mixed, reflecting the bifurcation of the economy into some regions and industries that experienced recovery and others that did not.

Improving sales in the US, and strong results in China, helped move Walmart back to Number 1, ahead of Amazon, as the most valuable retail brand in the BrandZ™ Top 100 Most Valuable Global Brands. Walmart has operated in China for 15 years and is accelerating its move into the country’s smaller interior cities, according to Kantar Worldpanel.

The first brands from a fast growing economy, Falabella and Sodimac of Chile, entered the BrandZ™ ranking of retail brands. One of the largest retailers in South America, Falebella operates department stores and specialty stores, including the home improvement chain Sodimac.

Walmart ended a long period of declining US same-store sales comparisons, suggesting that the brand reconnected with its core customers. Reversing a failed strategy to improve efficiencies and draw higher-income shoppers, Walmart added back around 10,000 stock keeping units, strengthening core categories, both in food and general merchandise.

Walmart’s entrance into South Africa, with the purchase of Massmart, a multibrand wholesaler and retailer, pointed to sub-Saharan Africa as a potential frontier of retail growth. Meanwhile, India affirmed regulations that continued to slow the expansion of multi-brand retailers such as Walmart and Tesco, restricting them to operate in India as wholesalers rather than retailers.

Price and quality won

With a brand value increase of 31 percent, Home Depot enjoyed the greatest improvement in the retail category, restoring value lost during the housing slowdown. Improvements in service and logistics that Home Depot made during the recession prepared the brand to benefit from the housing market recovery.

Like Home Depot, other brands that appreciated in brand value also combined price and quality into propositions that appealed to consumers battered by the economy. These brands included the discount grocers Aldi and Lidl and the warehouse clubs Costco and Sam’s Club. IKEA also gained from the improving housing market and from sales in fast growing economies, especially China.

Hypermarkets, such as Tesco and Auchan, benefited from sales in China, but faced a challenge in developed markets because their large stores and expansive product ranges did not convey the price and convenience consumers sought. Carrefour, in particular, struggled. These brands focused attention on opening smaller neighborhood locations.

Omni-channel became the new buzzword

And, like most retailers, the hypermarkets also worked to become omni-channel. Omni-channel describes multi-channel retailers present in both the virtual and real worlds with the added ability to reach customers as they move across channels, even simultaneously shopping in the aisle of a physical store while checking the competition on a mobile device.

The growth of omni-channel retailing reflected the disappearance of the linear path to purchase and the emergence of a more complicated constellation of physical and virtual shopping locations. Retail entered a new phase, with attempts to seamlessly integrate physical stores with online e-commerce in all its mobile and computer variations.

In one of the more interesting omnichannel efforts last year, Tesco installed an interactive screen in the Seoul, Korea, subway. Branded Home Plus, Tesco’s name in Korea, the installation presented photos of products with the QR code, enabling customers to purchase on the spot for home delivery. The approach reflected a “click and collect” trend among large food retailers, which enables customers to buy online and pick up the order at their local store.

Retailers reimagined the store

The benefits of convenience, selection and price continued to drive the growth of e-commerce, as consumers increasingly used Amazon as a search engine to begin their shopping trips. Retailers reimagined the role of physical stores as places to evoke brand experience with a combination of assortment, service, display and design that inspire brand loyalty and purchasing—whether instore or on a computer or mobile device.

Brands heavily invested in bricks and mortar locations reexamined their strategies. Big box leaders, such the electronics retailer Best Buy, struggled to find a new and distinctive place in the market. At the same time, Amazon attempted to compensate for its lack of physical stores by experimenting with delivery pick-up locations at select 7-Eleven outlets.

Apple emerged as a retailer especially able to project consistent brand experience both on its website and in its physical stores (Please see technology category story on page 87). It ended its 2011 fiscal year with 357 stores averaging $43.3 million in annual revenue.

BrandZ Top 100 2012

BrandZ Global 2012 Report Top 100 Report

Top 100 Chart

Methodology and valuation by Kantar Millward Brown

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