Monday, January 19, 2009

A guaranteed argument-starter

If you want to get a heated argument (or at least a spirited discussion) going, just put together a list and title it "Best of ______". Whether it's the Top 100 Movies of All Time or the Best Books Ever Written or the 10 Best Quarterbacks, you're certain to leave a name off the list that many people believe should be near the top.

Interbrand has been putting out lists of the top brand name for a long time now, but this year for the first time they have compiled a list of the Most Valuable U.S. Retail Brands.

Numero Uno isn't going to surprise anybody, with Walmart's $129.8bil brand value being rated roughly six times that of runners-up Best Buy's $22.0bil and Home Depot's $20.8bil. Target and CVS follow.

But two of the top ten "retail" brand names are brands I would think of first as products -- #6 Dell and #10 Coach. Besides Dell, two other on-line retailers are in the top fifteen -- #11 Ebay and #14 Amazon. (Is Ebay a retailer at all? They sell nothing, others sell through them. They are really more like a mall, aren't they?)

See how quickly we can get an argument started?

There were a number of other interesting points. I was surprised to see Sherwin-Williams, with their mostly small outlets located in strip malls, ranked at #23. I was equally surprised to see American Girl, with only three or four outlets, on the list. But on reflection, both companies, however different, have done a good job of establishing thyemselves as brands, and maintaining their brand identity.

Where's Macy's?

The most interesting thing about such lists, though, is not who's on them, but who isn't. The #1 department store chain in the country, Macy's, is conspicuous by its absence, as is the former #1 retailer in the world, Sears.

Three department stores made the list -- Nordstrom (13), Kohl's (22), and JCPenney (24). Interbrand states, though, that department stores as a group have become "commodity chains without real difference." But they add a hopeful note:
... Macy's, Saks Fifth Avenue, Dillards and Sears have considerable brand strength, though they didn't make the list. All have the opportunity to capitalize on their brand to improve their financials.
But the most glaring omission was ...

No Supermarkets?!?!

Not a single traditional supermarket made the list. The only food retailer was Whole Foods at #47. Kroger? SuperValu? Didn't make the cut.
Traditional grocery earned the weakest customer loyalty scores. Over-reliance on discounts, rewards and promotions undermines any move toward a meaningful proposition and results in low brand strength.
If customer loyalty is a key measure of brand strength (and most would agree it is) then it's hard to argue that supermarkets have strong brands. Interbrand notes that further undermining the brand names of the leading chains is their multiple banners (Kroger includes Ralph's, Fry's, etc). And they also mention how excessive reliance on promotional funding can undercut branding:
The grocery sector also often misses out on opportunities for product differentiation, since small entrepreneurial manufacturers can’t afford to supply supermarkets due to the cost of supporting their promotions and the payment of slotting fees. In the U.S., there are a trillion dollars moving from the manufacturer to the grocer every year. As long as their vendors continue to pay for play, supermarkets may see no need to understand and serve the shoppers in their stores.
That last sentence sounds a bit harsh (and that's the first time I've heard that trade promo equals a trillion (!) a year in the supermarket channel alone), but I do agree that supermarkets harm themselves by locking out smaller suppliers, who could help them create a brand difference. Unfortunately, they're now hooked on trade promo, which is the difference between profit and loss, and kicking the habit (or even cutting back substantially) might be too tough a challenge.

I don't agree with all the rankings, but I found the exercise interesting and thought-provoking. Give it a read, and enjoy arguing with Interbrand (or with me).

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