Driving and shopping – big sector shifts affecting brand value
When consumers around the world think of a German brand, it’s highly likely that an automotive brand will spring to mind first. Mercedes-Benz, BMW, Porsche, Audi and Volkswagen have all come to signal much of what’s great about German industry. Quality, precision manufacturing, design, craftsmanship and reliability.
But these are difficult times to be in the business of making and selling cars. Not because people don’t need to get around, but because environmental concerns are leading many consumers to rethink how they get from A to B, and whether they want a car at all.
Then there’s the question about how a journey is powered, and a growing preference for electric or hybrid vehicles over petrol and diesel ones. And compounding these challenges is the fact that new business models are emerging, replacing the old idea that if you want to ride in a car, you need to buy one.
Similar pressures affecting many industries, but they are affecting automotive particularly hard because car companies tend to work to long lead times, with each model years in the making, while consumer demand is based on fast cycles.
As well as having to compete with each other for consumers, established car manufacturers are also competing with agile new players such as Tesla, Byton (from China) and Polestar (from Sweden). They are also facing a challenge from completely different mobility providers – the likes of Uber, Lyft, Car2Go and BlaBlaCar, so are experimenting with their own car-sharing solutions.
It’s no great surprise, then, that car brands globally have lost 7 percent of their value in the past year. Ford dropped out of the BrandZ Global Top 100 ranking in 2019, and even Tesla’s brand value was flat.
In Germany, car brands also declined in value by 7 percent, and the broader automotive category, which includes cars, tires (Continental) and car rental (Sixt), dropped by 8 percent.
Porsche and Volkswagen – both owned by the same Volkswagen parent company – were the only car brands to post growth in 2020, up by 5 percent and 4 percent respectively. Volkswagen is still rebounding from the loss in brand equity it suffered as a result of “Dieselgate”, which affected many automotive brands but was most closely linked in consumers’ minds with VW, the first manufacturer to have been found cheating emissions tests.
The good news for car brands is that Kantar research forecasts growth of between 10 and 15 percent in global vehicle sales in the coming 15 years – but these will probably be much cleaner, more sustainable and more efficient vehicles than are currently available. They’re also likely to be bought and used in quite a different way.
Shared cars are predicted to be around 10 percent of global sales by 2030. Diesel and petrol models will be gradually replaced by hybrid and electric and, as self-driving cars mean motorists and passengers can do less driving and more riding, then the experience of being in a vehicle will become more about entertainment and connectivity than what we now think of as driving comfort.
In this new world, the strongest assets that the big names in “traditional” automotive will have is their brand. A brand that tells a story, engages implicitly and explicitly, and that connects with consumers through its beliefs and values. They must offer a unique and exciting experience, providing respect and reassurance.
Action points for car brands
- Tailor communications – As attitudes to mobility evolve, so too must communications. Urban consumers will be more receptive to a new take on mobility, while rural residents are likely to be vehicle owners for longer. Understand how changes take place among different consumer groups – and talk to them differently.
- Build loyalty – This will become even tougher than it is now, as leasing and other short-term arrangements for transport become more common. Brands need to coordinate all aspects of technology to keep customers with the brand.
- Leverage data – As cars get connected, they become a rich source of consumer data; brands can use analysis of that data as an opportunity to serve customers better and build loyalty. Driving patterns, for instance, could be used for tailored advice on maintenance.
- Improve the experience – As well as focusing on ways to improve the driving and riding experience, look at how you might give consumers a better buying experience, by rethinking the role of dealers and incentivizing them based on something other than just straight sales figures.
Let’s go shopping!
The retail sector is also undergoing a transformation, but given that e-commerce is well established in Germany, the painful period of adjustment seems to have already sorted the winners from the losers.
Those brands that have survived the digital shake-out have done so because they have proved able to adapt to a new world in which choice, convenience and a better shopping experience are simply expected.
The value of retail brands in the German Top 50 rose 9 percent this year, with 12 brands contributing to a total value of close to $41.5 billion. That total is helped by the inclusion in the Top 50 this year of Fielmann (in 35th place) and Tchibo (50th).
What marks out many of these players is that they have been disruptors in their respective areas of the retail sector; in Fielmann’s case, it has transformed the way that consumers choose and buy eyewear. Tchibo has a unique range that changes frequently to keep shoppers dropping into its stores on a regular basis. Otto is the only one of Germany’s three big catalogue-based retailers to have successfully made the switch to e-tailing, with a bigger, fast-changing range.
Aldi and Lidl started out as disruptors of the traditional supermarket model, with their focus on providing a limited, back-to-basics range and a bare-bones experience in order to optimize value for money. They, too, have adapted to the new, digitally enabled and newly demanding consumer, and are investing in providing a pleasant shopping experience as well as bargain prices.
This is a trend we have seen in other BrandZ markets as well as among global retail brands. The going is tough, but the rewards are great for those that are adapting – and showing a willingness to change not just their way of selling, but in some cases their entire business model.
Lessons in trust
German retailers stand out for being fair and trustworthy. This is measured on the ReputationZ scale, an element of the BrandZ study.
Fairness is often about fair pricing, but it also extends beyond that, to fair treatment of staff, suppliers and the environment.
In times of uncertainty, trust becomes more important to consumers than ever. Trust is vital not just because it’s an indicator of whether a consumer will buy a brand, but also because BrandZ global research shows that trust and recommendation are strongly linked. Recommendation matters enormously now, given the increasingly widespread usage of social media.
The trust that German retailers have built up – often over many years – is now helping them sustain and grow their brand value. The drugstore chain dm, for instance, has become known for fair pricing, sustainability and warm treatment of its staff. Fielmann is very family focused, Rossmann is strongly associated with the values of its founder, Dirk Rossmann, who in 2019 released a bestselling book on how he built up the business. Other retailers have focused on sourcing local fresh produce, or giving consumers the lowest possible prices.
It could be said that German retailers were focused on brand purpose before it rose to the top of every other marketer’s “To do” list.
Case in point: Otto
Rank 46 | Brand Value $1,254m | % change +18%
Otto is now the largest online lifestyle and fashion retailer in Europe. It offers over 3 million items from 6,800 brands and, at peak times, it receives up to 10 orders per second. What’s just as remarkable is that this digital-only retailer, with a strong emphasis on social media marketing, is 70 years old.
Today’s Otto is a long way from the Otto of old. It is undertaking a business transformation and rebranding, establishing itself as a true rival to Amazon, but with a more curated offering and a commitment to high standards regarding fairness.
The brand began its life as a telephone sales service but became famous for the twice-yearly Otto catalogue, a hefty tome of around 800 pages, which was discontinued in late 2018 after 68 years. Cancelling the catalogue was a bold statement of change for Otto, and one that has been paying dividends for the brand.
Otto’s entire catalogue is now shoppable via Pinterest, and the brand is a major presence on YouTube, TikTok and Instagram, where light-hearted videos and images encourage consumers to be themselves with Otto.
The new business model and brand strategy have helped make Otto one of the three fastest-growing brands in the German Top 50, with clearly increased levels of Salience, Meaningfulness and Differentiation.