View the full Brand Finance Retail 50 2020 report here
Brands in the retail sector are likely to record mixed fortunes as a result of the COVID-19 pandemic, with e-commerce brands predicted to fare the best compared to automotive retailers, which are expected to suffer considerably, according to the latest report by Brand Finance.
The top 50 most valuable retail brands, on average, should see a slight increase in brand value following the pandemic, growing a modest 1% – a result of the majority of the brands in the ranking either being e-commerce brands or dominant, well-known brands, which tend to have strong e-commerce capabilities.
The Brand Finance Retail 50 2020 ranking does not include apparel brands, however, which are predicted to suffer significant damage. Brand Finance has calculated that the apparel sector will be heavily impacted by the COVID-19 pandemic, with brands across sector potentially losing up to 20% of their brand value. More information on the sector and the COVID-19 analysis can be found in the Brand Finance Apparel 50 2020 report.
Richard Haigh, Managing Director, Brand Finance, commented:
“The sheer size and diversification of the retail sector means that brands are inevitably going to be affected differently by COVID-19. Brand Finance’s analysis demonstrates that e-commerce brands and dominant retailers in the market, could buck the trend and thrive as demand spikes in the online space. At the other end of the scale, automotive retailers could see a 15% drop in brand value as supply chains falter, car use drops and consumer spending habits change.”
Amazon in a league of its own
Amazon remains a cut above the rest in the Brand Finance Retail 50 2020 ranking, breaking the so far unattainable US$200 billion brand value mark, following 18% growth from US$187.9 billion last year. Amazon’s brand value has now reached US$220.8 billion, substantially ahead of second-placed, Walmart, with a brand value at US$77.5 billion. The majority of Amazon’s revenue still comes from its retail division and despite the growing challenges to the brand - particularly in its international operations – the brand is untouchable in the sector.
While most brands are experiencing or expecting a slump in revenue during the pandemic, Amazon is set for continued growth. As with fellow e-commerce brands, Amazon has been benefitting from the unprecedented surge in demand as consumers turn online following store closures. With over 100,000 workers hired and more in the pipeline, the brand is fighting to meet this demand. This spike has not come without its challenges, as Amazon’s logistics and supply chain network are being stretched to uncharted levels and the brand’s illustrious next day delivery service is being tested, with fulfilment and third-party vendors extending their lead times considerably. First time users of the platform may not be experiencing the world-leading level of speed that the brand prides itself on, which could jeopardize its long-term reputation.
Richard Haigh, Managing Director, Brand Finance, commented:
“Amazon’s sheer dominance in the e-commerce space should stand them in good stead in the coming months as the world tackles the far-reaching repercussions of the COVID-19 pandemic. Brand Finance has calculated that Amazon’s brand value could grow a further US$4 billion thanks to the spike in demand. Nevertheless, the world’s online marketplace must look beyond the coming months to ensure that quality and speed are not compromised should it wish to maintain its exceptional reputation and thus retain new users.”
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, familiarity, loyalty, staff satisfaction, and corporate reputation. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria Amazon is the world’s strongest retail brand with a Brand Strength Index (BSI) score of 89.1 out of 100 and a corresponding AAA brand strength rating.
Despite Amazon claiming this position for the first time, the brand has recently been handling less than favourable attention for its warehouse conditions, with concerns being raised further for safety during the current COVID-19 pandemic. With multiple employee strikes, the brand’s response will be crucial should Amazon wish to maintain staff satisfaction and thus a high BSI score.
Walmart on the rise
In the traditional retail space, Walmart has seen its brand value resurge, jumping 14% to US$77.5 billion. As well as committing to its expansion programme in key markets, Walmart has focused on an innovative digital proposition, through a partnership with Microsoft and with the launch of Alphabot – robots that pick and pack online grocery orders at high speeds. Walmart - along with fellow mass merchant stores and supermarkets - is likely to see a boost to brand value following the COVID-19 pandemic as demand reaches an all-time high and strong storage and supply capabilities can be leveraged.
Supermarkets surge
Discount supermarket chain rivals Lidl (US$12.4 billion) and Aldi (US$14.3 billion) are the fastest growing retail brands in the ranking, growing 40% and 37% respectively. Lidl and Aldi have reshaped the supermarket landscape by winning market share from their long-established high street counterparts. Initially competing on price leadership, both chains have gradually earned their customers’ trust and loyalty. With almost identical propositions, however, the brands will need to differentiate themselves in order to continue to successfully widen their footprint globally.
In contrast, British supermarket chain Sainsbury’s is this year’s fastest falling brand after dropping 27% to US$4.2 billion. Two further British supermarkets feature in the ranking, Tesco (down 3% to US$11.0 billion) and Asda (up 14% to US$6.3 billion) claiming 16th and 28th position respectively.
In Spain - one the worst hit nations from COVID-19 – Mercadona is one of the top 5 fastest-growing brands, up 30% and simultaneously jumping from 48th to 41st position in the ranking.
Richard Haigh, Managing Director, Brand Finance, commented:
“Supermarkets are one of the few winners to come out of the COVID-19 pandemic, with brands seeing Christmas levels of demand, resulting in hiring sprees for thousands of temporary workers – Tesco alone has hired 20,000 new workers in the UK. It is likely that many of them will rebound and post positive brand value growth over the course of 2020, while brands other retail segments are struggling.”
Hardship ahead for home product stores
Despite being the world’s third most valuable retail brand and recording a solid 7% increase in brand value to US$50.5 billion, Brand Finance’s COVID-19 impact analysis suggests that home furnishing and improvement stores such as Home Depot are likely to lose the most brand value, dropping up to US$6 billion. Although the brand has cited increased demand for urgent home repair products, this demand is unlikely to offset the decline in big-ticket item purchases, as well as other construction products
The story is similarly as bleak for fellow home product stores in the ranking - Lowe’s (up 3% to US$24.8 billion), Ikea (down 9% to US$19.5 billion) and Leroy Merlin (up 21% to US$4.7 billion) - which all stand to lose 12% of their brand values. These brands lack of strong online presence means they will struggle to maintain sales revenue as they negotiate reduced store hours and closures. As with other brands globally, the level of damage to these stores will depend on how long the pandemic engulfs their markets.
View the full Brand Finance Retail 50 2020 report here
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 50 most valuable retail brands are included in the Brand Finance Retail 50 2020 report.
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 the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in the Brand Finance Retail 50 2020 report.
Data compiled for the Brand Finance rankings 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 independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).
Brand Finance’s brand value rankings have been certified by the Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.
Methodology
Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020
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
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 Brand 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.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for more than 25 years, Brand Finance evaluates the strength of brands and quantifies their financial value to help organizations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes over 100 reports which rank brands across all sectors and countries.
Brand Finance also operates the Global Brand Equity Monitor, conducting original market research annually on over 5,000 brands, surveying more than 150,000 respondents across 38 countries and 31 industry sectors. Combining perceptual data from the Global Brand Equity Monitor with data from its valuation database enables Brand Finance to arm brand leaders with the data and analytics they need to enhance brand and business value.
Brand Finance is a regulated accountancy firm, leading the standardization of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671 and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined 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. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
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 Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings 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, while 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 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.
