· Tech giant Amazon lunges further into retail space, defending title as world’s most valuable retail brand, brand value US$187.9 billion, AAA- brand strength rating
· Stark contrast in China: Alibaba up 51% to US$14.6 billion, JD.com down 42% to US11.4 billion
· US giant Lowe jumps three spots to 4th place, growing 49% to US$23.9 billion, closing gap with rival Home Depot
· Canada’s Circle K fastest growing, up 60% to US$5.9 billion
· Japan’s 7-Eleven is strongest retail brand, 85.9 out of 100 BSI score
Amazon remains the standout brand in the Brand Finance Retail 50 2019 ranking, growing 25% to US$187.9 billion, and holds its position as the world’s most valuable retail brand.
Amazon’s ever-diversifying portfolio is leaving its retail competitors even further behind. The recent announcement of Amazon’s new grocery store business across the US immediately hit rival retailers shares including multinational giant Walmart (brand value up 10% to US$67.9 billion) and supermarket chain Kroger (up 8% to US$5.6 billion).
The dominance of Amazon is undeniable with its brand value totalling more than the following five brands in the ranking combined: Walmart, Home Depot (up 39% to US$47.1 billion), Lowe’s (up 49% to US$23.9 billion), IKEA (up 11% to US$21.5 billion) and CVS Health (3% to US$21.3 billion).
Amazon’s CEO, Jeff Bezos, took the top spot on Brand Finance’s inaugural Brand Guardianship Index study. However, the mixed public reception of his recently announced high-profile divorce poses a reputational challenge for Bezos and brand Amazon as a whole. If mishandled, the separation process could cost the brand well in excess of US$10 billion; with the expectation that the range of loss could be between 5%-10% of Amazon's current brand value.
David Haigh, CEO of Brand Finance, commented:
“Amazon is continuing to grow at an unprecedented rate, through snapping up more strategic acquisitions across a huge variety of businesses: from home security brand Ring to online pharmacy retailer PillPack. Amazon’s dominance over the retail space emphasises the strength of the e-commerce giant as it leaves competitors in the traditional bricks and mortar space lagging further behind.”
Home Depot vs Lowe’s
Rival US home improvement retailers, Home Depot and Lowe’s, have both boosted their brand value, increasing 39% to US$47.1 billion and 49% to US$23.9 billion respectively. This increase is fuelled by a number of factors in the market including: income growth; lower federal tax rates; and continued home price appreciation.
Lowe’s 7th to 4th jump could be attributed to the appointment of a new CEO, Marvin Ellison, who has made big changes within the brand, from changing his executive team to shutting underperforming stores. As Ellison continues to put his stamp on Lowe’s, the brand has the potential to further reduce the gap with Home Depot.
JD.com lagging behind Alibaba
China’s Alibaba (up 51% to US$14.6 billion) and JD.com (down 42% to $US11.4 billion), ranked 10th and 11th respectively, have had polar opposite shifts in their brand value. Both brands have the pressure of the slowing Chinese economy and the US-China trade war to contend with, meaning an uncertain future.
JD.com has had a turbulent year following the high-profile coverage of the CEO’s arrest and the reputational damage suffered as a result. This has impacted both its customer base, shrinking for the first time in four years in November 2018, and its shares which fell 6% overnight as news broke. Striving to diversify, the brand has recently announced partnerships with Google Express, to increase its footprint in the US, and with Rakuten to develop drone delivery, however it remains to be seen what the impact of these ventures will have on its brand value in the coming year.
Alibaba is continually looking to diversify its offering with a variety of initiatives: the partnership with NBA China, originally set up in 2012, is now starting to bring NBA content to Alibaba platforms and boost online shopping opportunities for Chinese consumers. Alibaba has forged partnerships with global brands including Starbucks, boosting its delivery and digital presence in China, and Intel, collaborating on hybrid cloud, internet of things, and smart mobility.
Fastest growing is Canada’s Circle K
Canadian multinational chain of convenience stores, Circle K, is the fastest growing brand in the retail rankings with an impressive 60% increase in brand value to US$5.9 billion. Circle K posted a 21% increase in revenue in the second quarter of 2018, which can largely be attributed to: the steady increase in fuel prices; the continued roll out of newly-branded branches across more than 4,050 stores in North America and 1,800 stores in Europe; and the completion of the Bloomington acquisition and its Holiday Stationstores network of convenience stores, which total over 500.
7-Eleven is world’s strongest retail brand
In addition to calculating overall brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Along with the level of revenues, brand strength is a crucial driver of brand value.
According to these criteria, 7-Eleven has maintained its position as the world’s strongest retail brand. The brand’s Brand Strength Index (BSI) score sits at an impressive 85.9 out of 100, with a corresponding AAA rating.
The Japanese-owned US-headquartered brand is now looking towards India for new store openings. With over 2500 convenience stores in Tokyo alone, the brand also has a presence across Thailand, China, Denmark, Australia and the UAE, through area license and master franchise agreements.
Note to Editors
Every year, leading brand valuation and strategy consultancy Brand Finance values the world’s biggest retail brands. The 50 most valuable retail brands in the world are included in the Brand Finance Retail 50 2019 ranking.
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, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Retail 50 2019 ranking.
Brand Finance helped craft the internationally recognized 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 ICAEW and also the first brand valuation consultancy to join the International Valuation Standards Committee (IVSC).
The methodology used to produce the annual Brand Finance rankings of the most valuable and strongest brands across all sectors and countries has been certified with the Marketing Accountability Standards Board’s (MASB) Marketing Metric Audit Protocol (MMAP).
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.