Walmart is the Brand Finance Best Retail Brand 2012 but Amazon.com gains ground as online sales soar
Will online success spell the end of the High Street?
The Best Retail Brands 2012 shows that although Walmart managed to increase their brand value by 6% and be named the Number 1 Retail Brand 2012, the study by Brand Finance plc shows that rivals Amazon.com achieved an impressive 61% increase in brand value. In the past Walmart has been keen to build its online presence to match its control of physical sales but the Best Retail Brands 2012 shows that Amazon.com could soon be dominating the online market.
Two of the highest climbing brands Amazon.com and eBay are businesses based 100% online which demonstrates the size of the online market as well as the enormous success of Amazon.com’s investment in Kindle, a new market for the corporation but a hugely profitable one.
Amazon.com and eBay’s success is thanks to the £50.34 billion, or 12.0% of UK Retail Trade, spent online in 2011. The equivalent figure in 2008 was a mere 8.6% of retail sales (Source: Kelkoo).
David Haigh, CEO of Brand Finance, stated ‘the significance of online retail cannot be underestimated and all major players in the retail industry should turn their attention to the promotion of their online sales in 2012 as the global economic crisis affects spending habits around the world.’ The United Kingdom is the leader in Europe for online retailers and the e-retail market is currently growing at 16% per annum.
Tesco was named the most valuable retail brand in the United Kingdom but, like many other British supermarkets such as Sainsbury’s, suffered a loss in brand value proving that 2011 has been a difficult year for the high street.
For the full list of the Best Retail Brands 2012 visit www.brandirectory.com
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations 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 is a regulated accountancy firm, leading the standardisation 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.