Omni-channel World Challenges Retailers
Improving brand experience
The resurgent US economy drove an impressive 17 percent brand value growth in the retail category last year. Brand value declined 5 percent a year ago.
But the US was only part of the story. Brand became a more important tool for differentiating retail organizations and attracting consumers who shopped anytime anywhere, often on mobile devices, even visiting more than one location simultaneously.
Retailers developed brand ecosystems for reaching consumers in a unified way across all channels. To draw traffic and build loyalty, retailers worked to improve the in-store brand experience.
The impact of all of these initiatives varied across geographic regions and store formats. Brands with a major presence in Europe, especially hypermarkets and food retailers, felt the impact of the Continent's financial troubles. Amazon returned to the number one rank in brand value, ahead of Walmart. Other trends included:
Retailers starting to act like media owners, organizing vast customer data, creating relevant content, and generating additional revenue from suppliers eager to target key audiences.
Benefits of technology
High margin brands were more likely to use technology to improve customer experience, while mass brands used technology more to focus on pricing and assortment.
Retailers struggled with constant pricing fluctuations by Amazon and other online retailers that were able to rapidly analyze sales data and adjust almost instantaneously to competitive conditions.
New brands enter the ranking
The US brand Whole Foods entered the BrandZ™ retail ranking for the first time on the strength of the US economy and the brand's unique positioning. With more than 340 stores in North America, and a small presence in the UK, the brand stresses its commitment to healthy and organic product ranges.
Whole Foods achieved one of the highest Brand Contribution scores in the retail category. Brand Contribution measures the part of brand value directly attributed to brand alone, not to financials or other factors.
With the retail category redefined this year to include drug stores, Walgreens and CVS entered the BrandZ ranking for the first time. Walgreens operates about 8,000 stores in the US and last year purchased a major stake in UK-based Alliance Boots, which controls 11,000 retail outlets in 15 countries. The two companies formed a strategic partnership for global expansion.
Two Australian supermarkets, Woolworths and Coles, also entered the BrandZ retail ranking this year. And Woolworths appeared as number 80 in the Top 100 Most Valuable Global Brands across all categories.
With a 43 percent increase in brand value, following a 31 percent increase a year earlier, Home Depot benefited from the rebound in the US housing market and stronger sales to professionals, as well as operational investments made when the US economy was weakened. Lowe's, a competitor, increased 26 percent in brand value. The returning confidence of US consumers also influenced Costco's 33 percent increase in brand value.
The new convenience
The brand strength of Whole Foods reflects several cross-category consumer trends including: concern with personal health, interest in niche offerings, and environmental awareness. In addition, the Whole Foods success in the US demonstrated the possibility of earning a price premium when the brand experience is executed well.
In a similar way, the Walgreens presence in the BrandZ ranking illustrated the growing importance of another retail trend: the new convenience, which includes simplifying the in-store shopping experience with clearer navigation and faster checkout. In a test that's also indicative of the growing importance of mobile, Walmart tested a program enabling customers to self-checkout using their smartphones.
With a new strapline, "at the corner of happy and healthy," Walgreens announced intentions to integrate the in-store and online experience. The effort was most evident in its strategic use of mobile, which underscored the brand's omnipresence in the US. Customers can order prescription refills and have them sent to any of Walgreens' locations in 50 states for pick-up. Similarly, customers can send Instagram photos for printing to their local stores or to a location near a friend or relative anywhere in the US.
These kinds of online order and physical pick-up options continued to be popular in Europe where retailers offer click and collect as an alternative to home delivery, which can be difficult for customers to fit into busy personal schedules. Walmart tested click and collect in some of its stores. The Australian supermarket Woolworths also provided the service.
Physical locations, sometimes dismissed as expensive legacy real estate, seemed to offer new brand experience and convenience advantages. Amazon continued to install merchandise delivery lockers in UK High Street shops and in 7-Eleven convenience stores in the US.
Slower growth regions
Struggling economies impacted the retail category. Tesco and Carrefour, brands known for their large surface stores, declined in brand value, in part because of weakness in overstored European markets. Tesco exhibited strength in fast growing Asian markets, however. And the turnaround plan of Carrefour's new management showed progress.
Aldi and Lidl declined in brand value, too, suggesting that the economy hurt even the usually more resilient food hard discounters. Big box merchants continued to diversify their portfolios of stores to include smaller outlets for urban areas and other under served markets.
The slowdown in China's rate of economic expansion impacted global retail brands. Walmart, with over 375 stores in China, announced that it would reduce its expansion rate, opening 100 stores over the next three years. The chain will focus on reaching the country's lower tier cities. China remains a key market for Walmart, Tesco and Carrefour, the three largest global retailers in sales.
Walmart completed its acquisition of South African retailer Massmart. With the relaxation of India's foreign investment regulations last year, Walmart gained greater access to the market and planned to open its first Indian retail outlet within a few years.
Global brands received regulatory scrutiny. Amazon faced tax issues in the US and UK. Walmart tightened oversight following allegations of bribery related to its expansion in Mexico.
Most of the global brands advanced social responsibility initiatives. During this period of high unemployment, Walmart pledged to hire more than 100,000 veterans of the US armed services over the next five years.
Insights BrandZ BigData™
Brands rate high in price, but desire, trust weaken
Big is certainly efficient and consumers recognize the good deal they are getting from the large global retailers, online and in-store. The BrandZ™ "price" rating for the most valuable retail brands is very favorable but their "desire" rating, while still being positive, has declined significantly.
The same applies to "trust," (how consumers feel about the brand's past performance), and "recommendation" (what consumers expect from current brand performance).
The most prominent characteristics of the retail brands are being "friendly"' and "straightforward," but these perceptions are no greater for the most valuable retail brands than for all retail brands. The retail brands that go further in putting the customer first stand to be able to gain over the pack.
1. Simplify shopping
Used to the “new convenience,”
clicking online rather than driving and
parking, consumers expect a simplified
experience when they visit physical
stores. Navigation and checkout need to
improve. Retailers need to make it easer
for customers to walk, see, try, purchase.
2. Build Brand
Show rooming received disproportionate
publicity. Roughly 50 percent of
sales today are influenced by people
researching online and then show
rooming in-store. Meanwhile, less than 10
percent of sales happen online. Amazon
is actually the biggest showroom. Strong
brand proposition is the best antidote to
3. Provide value
Shoppers aren’t always looking for the
absolute best price. Especially for relatively
inexpensive products, shoppers often will
be satisfied when a price allows them to
feel if not smart, at least not stupid.
4. Drive trips
Within the regular assortment, identify
the item that customers buy most often,
and be definitively different. The trick for
experiential stores is to find a way to be
good at something that drives frequency.
In the Apple store, the Genius Bar serves
this function. It draws customers to the
store more frequently than if they’d visit
only for their purchasing needs.
5. Execute relentlessly
Shoppers sometimes leave a store
with a different brand experience than
they had in mind when they entered.
Often that’s not a good thing. That’s
because some retailers do a better job
of attracting rather than retaining. The
consistent delivery of brand experience is
more difficult in retail than in many other
categories. But it’s crucial.
6. Leverage data
Retail brands also are a communication
vehicle for suppliers. The supplier
gains credibility being associated with
a relevant retail brand. The retailer
becomes the media owner, a gatekeeper
to the community and the conversation.
This braided marketing approach
interlocks trade and retail for mutual gain.