· Amazon is the most valuable retail brand in the world, topping not just the Brand Finance Retail 50 2018 but also the global ranking of brands across all sectors
· Online retail brands boom with Alibaba, JD.com, Amazon, and Zalando all recording over 40% brand value growth
· Merger of Sainsbury’s and Asda to shake up UK retailing as Walmart retreats from international pursuits
· Convenience retailer 7-Eleven is the world’s strongest retail brand
Amazon’s brand value has risen 42% to US$150.8 billion, retaining top billing as the world’s most valuable retail brand, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy.
As Amazon’s brand continues to innovate and make its presence felt across more markets, its brand value has swelled significantly, making it now worth as much as the second, third and fourth biggest retail brands combined. The value of Amazon’s brand has grown by an average of more than 30% a year in the past decade. This has seen it advance from “a mere” US$9.6 billion in 2008 to overtake Apple and Google as the world’s most valuable brand across all sectors in 2018.
David Haigh, CEO of Brand Finance, said:
“Amazon’s brand success is not based upon a marketing campaign, it is based upon a relentless obsession with customers. By aiming to remove every possible impediment to customers using its services, Amazon has built a brand that has no peer, providing unmatched convenience, availability, and scale. Its rise and the growth of other online brands worldwide have called the entire traditional retail model into question.”
Online brands boom
Other e-commerce brands are in hot pursuit, such as China’s Alibaba (up 58% to US$54.9 billion) and JD.com (up 47% to US$19.6 billion) as well as Germany’s Zalando (up 40% to US$3.8 billion) – the most valuable brand among new entrants in this year’s Brand Finance Retail 50 ranking.
Alibaba, this year’s fastest-growing retail brand in percentage terms, shows no sign of slowing down as it plans to invest US$15.2 billion towards its global logistics chain expansion. JD.com has had a remarkable year too, rising through the ranks into the world’s top 10 most valuable retail brands for the first time. JD.com’s success can be attributed to its advancements in retail technology and plans to market its developments to third parties around the world; effectively creating a Retail-as-a-Service (RaaS) offering.
Pressure on offline brands grows
With a global trend towards online retailing, pressure on offline brands is growing. For brands yet to adapt to the digitalisation of the industry, brand value has stagnated at best or plummeted at worst. The biggest fall in brand value this year has struck Target (brand value down 20% to US$13.7 billion). While the launch of their private brands such as Cloud Island and Pillowfort shows promise for the future health of the company, the Target brand is retreating from the limelight.
Despite retaining its position as the world’s second most valuable retail brand, Walmart (brand value down 1% to US$61.5 billion) has stagnated in brand value this year. Other big offline brands to face challenging times include Costco (down 9% to US$12.2 billion), Macy's (down 11% to US$4.9 billion), CVS Health (down 12% to US$20.6 billion) and Walgreens (down 3% to US$15.5 billion).
Focus on customer experience is paying off for those retail brands, which have made an effort to adapt to the changing marketplace. Home Depot (brand value up 12% to US$33.7 billion) has solidified its fourth-place ranking. By focusing on faster checkout lanes, improving supply chain efficiency, and investing heavily in its e-commerce platform, Home Depot has recovered, along with the US housing market in the past 10 years, with a steady compound annual brand value growth of 8%.
Taking technological integration to another level, IKEA (up 1% to US$24.4 billion) launched IKEA Place last year, an app that allows consumers to view products at home using augmented reality technology. In a bid to keep up with technological advancements in the retail space, IKEA has also been exploring virtual reality as a means for shoppers to trial new kitchen or bedroom layouts online. This move, along with the acquisition of TaskRabbit, demonstrates the continued innovative business model behind the IKEA brand, and indicates a strategic effort to reconcile online and offline channels.
UK high street shake up
Earlier this summer, the UK’s second-largest supermarket retailer Sainsbury's (brand value up 6% to US$5.4 billion) proposed purchasing the third-largest British supermarket brand Asda (brand value down 12% to US$6.4 billion) from Walmart. Currently, the combined company plans to continue operating the two brands, with Sainsbury’s continuing to position itself as a mainstream but upmarket supermarket, while Asda will continue to focus its brand positioning on price. The proposed merger between Asda and Sainsbury’s is currently being formally investigated by the competition watchdog, the Competition and Markets Authority (CMA).
In recent years, the market share of both Sainsbury’s and Asda has dropped, with shoppers moving to German budget retailers Aldi (brand value down 3% to US$9.2 billion) and Lidl (brand value up 7% to US$8.5 billion). Aldi and Lidl are more competitively priced than Asda, yet still maintained higher perceptions of quality amongst their customer base. In addition, Asda has been underperforming because of their very large, destination-style hypermarkets outside of major cities, whilst Lidl and Aldi are primarily located in towns with smaller stores or prime high-street locations.
The merger of Sainsbury’s and Asda may allow the combined entity to better challenge Tesco (brand value down 8% to US$9.9 billion) for market leadership, while at the same time, confront the challenge from the German supermarkets. Tesco has built a strong business as a mainstream retailer, but in recent years, has been challenged from both higher-end brands such as Waitrose and Whole Foods (brand value steady at US$3.8 billion) and more budget-focused brands such as Lidl and Aldi. As a result, Tesco has been struggling to retain market share.
David Haigh, CEO of Brand Finance, commented:
“Customers seeking a premium shopping experience are moving from Tesco, Sainsbury’s and Asda to Waitrose and Whole Foods, while budget-conscious shoppers are moving to Lidl and Aldi. If the proposed merger between Sainsbury’s and Asda goes ahead, it will allow the two brands to compete on both fronts, with Sainsbury’s becoming a premium brand, and Asda – if it survives – focused on price. Backed by the combined strength of enhanced distribution networks, buying power and cost efficiencies, it may allow the big stores to hold off online retailers for just a little longer.”
Convenience retailer 7-Eleven is the strongest retail brand
Aside from measuring the overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer perceptions, staff satisfaction, and corporate reputation. Along with the level of revenues, brand strength is a crucial driver of brand value.
While 7-Eleven (up 7% to US$8.4 billion) was ranked as only the 16th most valuable retail brand globally, it was recognised as the strongest brand with a Brand Strength Index (BSI) score of 85.9 out of 100, supported by high brand ratings amongst its stakeholders in different geographies. Currently, the brand operates in North America, Asia, Scandinavia, and Australia. The acquisition of 1,000 Sunoco retail stores across North America over the last year has been a major factor in 7-Eleven’s rise as the world’s strongest retail brand, with their brand rating increasing from AA+ to AAA. The additional sites are improving convenience and accessibility in one of their key markets.
View the full Brand Finance Retail 50 2018 report here
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 50 most valuable retail brands in the world are included in the Brand Finance Retail 50 2018 league table.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is assessed through a balanced scorecard of factors (such as marketing investment, stakeholder equity, and business performance) and used to determine what proportion of a business’s revenue is contributed by the brand.
Additional insights, more information about the methodology as well as definitions of key terms are available in the Brand Finance Retail 50 2018 report.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Data compiled for the Brand Finance league tables and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.