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:

Media owners

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.

Price disruption

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.

Action Points

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 show rooming.

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.

Retail Up 17%

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

BrandZ Top 100 2013

BrandZ Global 2013 Report Top 100 Report

Top 100 Chart

2013 BrandZ Top 100 Infographic

BrandZ 2013 Infographic

Methodology and valuation by Kantar Millward Brown

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