Interbrand unveils 4th annual Best Retail Brands Report – Woolworths most valuable across APAC
Interbrand, the world’s leading brand consultancy and author of the annual Best Global Brands ranking, has released its fourth annual global report dedicated to the retail sector.
The global Best Retail Brands report ranks the top 50 North American retail brands, the top 50 European retail brands, the top 30 Asia-Pacific retail brands and the top 20 Latin American retail brands–all by brand value. The report is produced in collaboration with Interbrand Design Forum, the retail experience group within Interbrand.
Walmart is the most valuable retail brand in North America and across all four regions, with a brand value of USD $131,877 billion.
Looking beyond North America, the following brands ranked as the top retailer in their respective regions:
· Woolworths – USD $4,948 billion (Asia-Pacific)
· H&M – USD $18,168 billion (Europe)
· Natura – USD $3,156 billion (Latin America)
From mobile shopping to virtual fitting rooms, the world’s most valuable retail brands are reimaging the customer journey through a digital lens. The report also suggests that major retailers are looking beyond their core business models to gain competitive advantage. They are doing this by using online innovation to bridge the divide between in-store and online shopping and by developing a strategic understanding of sales data so that they can meet customer needs and desires better and faster than ever before.
Says Jez Frampton, Interbrand’s global chief executive officer: “Adapting retail formats to accommodate the shift in consumer preferences for e-commerce is proving to be the key to success for many retailers worldwide. In today’s rapidly evolving global marketplace, retail brands must be more agile, flexible, and responsive than ever before. The winning retail brands will not only survive the continuous shift to digital retail, they will become more extraordinary because of it.”
KEY FINDINGS:
This year was a mixed bag of results for Australia’s biggest retail brands, with several brands reflecting an upswing in consumer confidence, whilst others languish under outdated business models as they struggle to make sense of digital and a shrinking middle-market for many consumer goods. Notably Woolworths and Coles supermarkets found themselves among Asia’s top retail brands, both showing strong growth, with Woolworths topping the list as the most valuable retail brand is Asia just shy of $5bn USD despite Coles making strong gains as it catches up to its long-time rival, crossing the $4bn mark for the first time. Taken as a whole, Wesfarmers and Woolworths dominate 6 of the top 10 spots in Australian retail, reflecting the concentration of the market and perhaps explaining the slow rate of innovation in the Australian retail sector compared with counterparts overseas. However, the growing share of ALDI and Costco in the Australian Market may yet spur the retail giants to up their game in competing for their share Australian’s wallets.
Harvey Norman, Myer, David Jones & Target are all brands that have declined again in 2014 reflecting not just increased competition from overseas and a strong Australian dollar, but also that they have largely not kept pace with changing consumer expectations and desires.
Damian Borchok Australian CEO of Interbrand summed up Australia’s department store’s continued under-performance.
Says Borchok: “Myer and David Jones both showed declines in their ability to create value through their brands. Despite stated plans to reform and transform, too little change is making its mark with the customer. Some argue that the market cannot sustain two premium department stores in the face of online competitors and international players. But the unanswered question remains: Why would the merger of two traditional retailers finally deliver a breakthrough business model that gives customers a better shopping experience?”
Accolades must go to Kmart and JB HiFi, by proving that focus and coherence across stores, product ranges and communications creates a compelling difference to customers, and by extension commercial performance.
Global key findings across the seven major retail categories include:
Apparel: Traditional Stores Expand, E-Commerce Innovates
· The remarkable success of apparel brands can be attributed to their sheer scale in addition to their unique brand attributes and strategies. Beyond real estate dominance, leading brands ably manage to stay on top of trends while feeding shoppers’ social media appetites. Online-only players are increasingly creating real world interaction with customers, such as pop-up shops, showrooms, and kiosks in enhancing the overall customer journey.
· H&M (#1 – Europe; +10%) Coach (#9 – North America; -21%), and Zara (#3 – Europe; +14%) lead as the most valuable retail apparel brands overall.
· Fast fashion giant, H&M opened a new store nearly every day in 2013. It keeps exciting consumers worldwide with its brand promise of stylish apparel at affordable prices, such as a $99 wedding dress and collaborations with designers such as Isabel Marant.
· In North America, T.J. Maxx (#32, +22%) and Marshalls (#34, +19%) rose as the apparel industry’s ‘top risers’. The off-price apparel and home good leaders are thriving by updating merchandise and responding quickly to current trends and styles. After an eight-year hiatus, T.J. Maxx, relaunched its e-commerce site, spending USD $200 million to acquire e-tailer Sierra Trading Post for its technology and expertise.
· On the European league table, online apparel retailer ASOS (#29, +59%) emerged as the ‘top riser’ among the apparel brands – having increased sales 37% in the last quarter of 2013. It was the top retailer on Pinterest last year and was the first fashion e-tailer to achieve Carbon Neutral status.
· Looking to the Asia-Pacific, apparel brands grew notably in brand value. Japanese retailer Uniqlo (#2, +14%) continues its impressive growth. China and the Asia-Pacific region remain vital markets for its continued growth, as does the U.S., where Forever 21 veteran Larry Meyer is overseeing an aggressive rollout of 100 stores and tweaking its “Made For All” sizing for America.
· In Latin America, leading Brazilian retailer Renner (#9, -30%) saw its brand value decline the most against its apparel competitors. However, with 16% market share and a business strategy focused on enchanting consumers, the second largest store chain in Brazil is well positioned to lead well into the future.
Consumer Electronics: The Battle for Market Share Moves to E-Commerce
· Most consumer electronics brands dropped in brand value this year. Retailers around the globe face a fiercely competitive environment. Ongoing challenges include waning customer loyalty and shrinking profit margins. Aiming to break down all the barriers between its stores and its internet and mobile sites, leading brands are focusing their efforts on their omnichannel strategies.
· U.S. based electronics giant, Best Buy (#20, -40%) witnessed the steepest decline in brand value across the four regions. As recently as 2009, Best Buy was the second most valuable brand in the U.S. after Walmart. Two years later, however, weak sales and online competition chipped away at the company’s dominion and by 2013, Best Buy had lost
more than 50 percent of its brand value.
· Online competition – coming primarily from Amazon (#4, +27%) – is price-centric and notoriously fierce.
· Amazon has enormous pricing advantages – not just due to low overhead, but also due to its ability to make millions of price changes per day compared to traditional retailers’ thousands a month. These price changes have begun escalating at brick and mortar stores as retailers fight for consumer dollars. Best Buy, for example, has begun matching any online price for the products it sells in its physical stores.
· In the Asia-Pacific, Australian electronics retailer, JB Hi-Fi (#27, +13%) had a decent year and is the only consumer electronics retailer that grew its brand value from 2013. Despite an industry-wide decline in physical music and entertainment sales, the electronics chain is expanding. It’s expanding its NOW-branded digital sales of music, books and movies and looking at online rentals, and adding appliances to its product mix by converting a handful of stores to its JB Hi-Fi HOME sub-brand.
Department Store: Weak in Mature Markets, Strong in Developing Economies
· Although the biggest retailers still have name recognition, the traditional department store format is largely fading away. Celebrated brands saw little growth in their stores throughout North America and Europe. Other parts of the world where department store growth is generally flat include Japan, Australia, and Korea. Such stagnant growth indicates the need for fresh brand appeal to new consumer segments.
· U.S based retailers Nordstrom (#12, -12%), Macy’s (#16, +383%), and Kohl’s (#17, +3%) lead as the most valuable department store brands.
· Referring to its rapid response to shoppers’ new digital behaviors, Macy’s calls itself America’s Omnichannel Store. Adopting a “digital hybrid” model, the retailer uses technology to create a tailored shopping experience within an environment that is fashion-forward, celebrity-infused and luxurious.
Drug Store: Adapting to Aging Populations and the Growing Demand for Health Service
· Two critical market trends continue to impact the growth of the drugstore category. First, is the world’s aging population, which is accompanied by rising levels of heath consciousness. Second, there’s a rising demand for affordable and accessible healthcare worldwide. While the traditional drugstore format continues to carry health and beauty products, the pharmacy is moving away from simple prescription dispensing to an active healthcare service function.
· CVS (#5 – North America; +12%), Walgreens (#6 – North America, +8%), and Boots (#8 – Europe, +2%) lead as the most valuable drug store retailers.
· When it comes to effectively utilizing mobile applications CVS/pharmacy and Walgreens lead the way. These brands make it easy to fill a prescription, shop by smartphone, manage one’s rewards program, or send pictures to in-store photo centers for printing. Customers who engage with Walgreens online and via mobile applications spend six times more than those who only visit its stores.
· With pharmacy making up 70 percent of sales, CVS is looking for ways to help customers better achieve health goals, including its recently announced landmark ban on cigarette sales.
Grocery: Fierce Competition, Fragmentation, and Format Challenges
· Grocery retailers are reinventing themselves according to how consumers want to shop. Trends driving change include mobile technology, home delivery, consumer income disparity, and the strategic necessity of e-commerce.
· Carrefour (#4 – Europe, 0%), Publix (#10 – North America, +2%) and Tesco (#5 – Europe, -16%) lead as the most valuable grocery brands.
· Carrefour, the world’s second-largest retailer by sales is in the midst of a turnaround plan. Internally, the global hypermarket operator is refining its vision, reorganizing to respond to local markets and developing a more relevant product offering. Externally, the priorities are multi-format, multi-local model, strict financial discipline, managing decentralization, and upgrading stores. 2013 saw better than expected operating growth of 5.3 percent and organic growth of 2.5 percent overall and 3.5 percent internationally.
· Whole Foods (#23 – North America, +173%) increased the most in brand value within the category. While others try to enter into the space, Whole Foods continues to dominate mind share and draw ever more consumers into its sphere of healthy eating. With more than 350 stores in North America and the U.K., the company sees enough demand to justify operating 1,000 stores in the U.S. alone.
Home improvement: Moderate Growth, Immense Potential
· To remain relevant in an increasingly competitive sector, top brands are creating meaningful experiences for their customers and communities. Shoppers are encouraged, inspired, and supported with service and instruction. Internationally, companies continue to experiment with the best way to expand.
· The Home Depot (#3 – North America, +12%), Lowe’s (#11 – North America, +9%) and Sherwin-Williams (#27 – North America, +15%) are the home improvement category leaders.
· Tractor Supply (#41 – North America, +16%) saw the biggest rise in brand value. The company continues to thrive by serving its market niche: recreational farmers and ranchers. In 2013, the company opened over 100 new stores, and is expanding into the western region of the U.S.
· Latin America’s Sodimac (#7, New) is finding opportunities to innovate through 3D visualization. The brand created a mobile app that lets shoppers view its catalog in 3D.
Mass Merchandise: Taking the Store Online and Into Smaller Boxes
· Walmart (#1- North America, -6%). Target (#2 – North America, +8%), and Amazon (#4- North America, +27%) continue their reign of dominance for the mass merchandise category.
· Walmart faces the same challenges as its peers around the globe: price competition from pure e-commerce brands – in particular, Amazon – and the growing popularity of small-box discount stores in the dollar and convenience categories. The retail giant has struggled internationally; closing stores in Brazil and China and i
s reassessing its strategy in India. With a new U.S. and global CEO to get the business back on track, it’s also investing in mobile and e-commerce to keep up with the 10 percent annual growth rate of U.S. online shopping.
· Amazon, whose brand value jumped 27%, is becoming a force to be reckoned with in the entertainment industry; expanding into online advertising and original programming for its streaming video service.
· For the past several years, Europe’s mass leaders Carrefour (#4, +7%), Auchan (#7, +7%) and Casino (#37, -2%) have been exploring new formats for their hypermarkets in combination with smaller stores and new services. Traditional big box formats have also been redesigned for better shopping experience, some with drive-through options.
Says Dirk Defenbaugh, managing director of Interbrand Design Forum: “The world’s best retail brands understand the complex and challenging relationships between analog and digital and have been quick to address changing shopper behaviors. By integrating the physical and virtual, making purchases easier, enhancing service, and using storytelling, these leading brands are reimaging their offers, and creating unique experiences for consumers that covert browsers into buyers.”
Detailed overviews of the four regions including North America, Europe, Asia-Pacific, and Latin America, are available here.