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Strong Brands Get Stronger

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What’s a brand worth? Well, when the brand in question is Walmart, the answer is a whopping $154 billion, according to Interbrand Design Forum. The firm has released its second annual ranking of the top 50 retail brands in America, and the giant discounter once again heads the list.

The study, “The Most Valuable U.S. Retail Brands,” is based on the idea that retail brands have a financial net worth that can be measured through the lens of financial strength, importance in driving consumer selection and the likelihood of ongoing branded revenue generated by the brand. (All contenders for the list must have publicly available financial data.) Underlying it all is the belief that brand—defined by Interbrand as the particular set of tangible and intangible assets that consumers attribute to a retailer—is something that belongs on the balance sheet along with other corporate assets.

“If a brand plays a role in choice, and the consumer must choose between competitors, then the brand contributes to earnings and profits,” said Lee Carpenter, CEO, Interbrand Design Forum and Interbrand North America, Dayton, Ohio.

To those naysayers who would downplay the role of brand in a down economy, Carpenter said that even among bargain-minded shoppers, the winning retailers will be those with engaging brand experiences.

“From a competitive perspective, the tough market demands differentiation, innovation and value-add like never before,” he added. “Brands need to be clear and compelling to stand out from price-based competition.”

As to the strength of the Walmart brand, the numbers tell the story. The chain not only came out on top, but did so by such a huge margin that no other retailer was even in striking distance of it. Its worth is six times as much as its closest competitor.

“Walmart, which grew its brand value by 19% over last year, continues to be the most valuable retail brand in the world,” Carpenter said.

Target was No. 2 on the list, with a brand value of $25.5 billion, up 49% from last year. The retailer pulled off an enviable feat: It was able to improve its operations to boost performance in the face of reduced growth without compromising its brand.

“Although Target’s traffic and same-store sales slid this year (2009), the company improved its financial operations, and market forecasts are positive,” Carpenter said. “We attribute this to the fact that brand-led companies—and Target is one—maintain their brand equities at the same time they streamline their assets, guided by what matters most to their customers.”

Five brands new to the list this year are Dollar General (#18), The Buckle (#45), Family Dollar (#46), Advance Auto Parts (#47) and Macy’s (#50). Five that fell out of the top 50 are Hollister, Barnes & Noble, Men’s Wearhouse and Anthropologie.

The study makes clear that strong brands get stronger. The most striking shift in the ranking is the overall increase in the value of the top 25, and the descent of the bottom 25.

Another important lesson from the study: An undifferentiated proposition can quickly diminish a brand’s economic value. “At the end of the day, lack of differentiation kills brand value,” Carpenter said.

The full report is a great read—each of the 50 brands gets its own capsule summary. For more, go to www.interbranddesignforum.com .