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GLOBAL 2016: Retail and fast food brands lead in value growth rate

Category factors and brand strength drive change

 What a difference a year makes. More than half of the 2016 BrandZ™ Global Top 20 Risers come from the retail or fast food categories – eight from retail and three from fast food. A year ago only three came from retail and one from fast food. What happened?
The retail and fast food categories benefitted from a counter trend released by the disruptive forces that slowed the overall value growth of the BrandZ™ Top 100 Most Valuable Global Brands this year. The plunge in oil prices and cheaper gas at the pump put more money in consumer pockets, especially in the U.S. where most of the Top 20 Risers are based.
The technology category, which was represented by six brands in the Top 20 Risers a year ago is still well represented, but with only four brands, because business-to-consumer technology brands experienced a year of iteration more than innovation, and the business-to-business brands continued to contend with the transition to cloud computing.
Two of the Top 20 Risers are Chinese brands: Huawei, from the technology category, and the online retailer JD.com. The retail brand 7-Eleven is based in Japan. The French brand Chanel is the only luxury brand that appears in the Top 20 Risers. The Top 20 Risers also include two brands from payments and one brand apiece from the apparel and the telecom providers categories.
Although larger macroeconomic forces helped determine the categories that appear in the Top 20 Risers, each brand in the Top 20 outperformed its category in value growth, and usually for reasons that have to do with brand strength and the ways in which the brand improved customer experience, often with the aid of the latest technology.

Online retailers show strength
Amazon, which leads the Top 20 Risers, rose 59 percent in brand value compared with an 8 percent increase for the retail category. The brand introduced Amazon Fresh food delivery in three U.S. cities and partnered with the grocery chain Morrisons for home delivery of food in the UK. In addition, Amazon delivered more merchandise using its own capacity rather than its logistics partners, a move that enables it to better control the customer experience, which in some 30 cities worldwide included one-hour delivery for Amazon Prime customers.
The brand also introduced Amazon Dash, a program in which customers signal for replenishment of certain FMCG items at the exact moment of need. It anticipates the transition to automatic replenishment of the Internet of Things. Amazon also developed its cloud storage business, Amazon Web Services, demonstrating how the border between business-to-consumer and business-to-business brands is becoming more porous.
JD.com, the second-fastest rising retail brand after Amazon, entered the BrandZ™ Global Top 100 for the first time this year. Established as Jingdong Mall in 1998, around the same time Alibaba began, JD.com is China’s second-largest e-commerce site after Alibaba. JD.com operates an efficient delivery system and maintains a powerful presence on WeChat, the social media site of Internet portal Tencent, with which JD.com has a strategic partnership. On WeChat, customers can text, shop and pay without switching platforms. JD.com also benefitted from the government establishment of cross-border e-commerce zones for reduced tariffs on foreign merchandise.
Technology remains strong
The other Chinese brand in the Top 20 Risers, Huawei, also demonstrates the porous border between B2C and B2B brands, as well as the increasing globalization of Chinese brands. Originally a maker of telecommunications equipment, Huawei shipped over 100 million smartphones in 2015, many to Europe, a 44 percent year-on-year sales increase.
Adobe, a B2B software supplier to marketing and communications professionals, is a newcomer to the BrandZ™ Global Top 100. Adobe succeeded by betting big on cloud computing and shifting from boxed software to a cloud subscription model three years ago. The subscription business grew 55 percent in 2015.
Facebook and Google continued their steady brand value growth rising 44 percent and 32 percent, respectively. Facebook effectively increased its mobile advertising sales. The brand also released its first virtual reality headset from Oculus Rift, the start-up company it acquired in 2014.
By creating a holding company called Alphabet, Google revealed its growth plans and clarified its priorities, which reassured stockholders. Google signaled a future in new businesses, including healthcare, life sciences and augmented reality. Along with new ventures, Alphabet includes a Google subsidiary that holds its core products, such as Android, Chrome, Gmail, Maps and Search. Google continued development of an autonomous car.
Retail and fast food add technology
Home improvement warehouse chains The Home Depot and Lowe’s benefited from the resurgent U.S. housing market. The Home Depot improved its customer service levels, a key attribute of its brand, and introduced new technologies to help shoppers, including an app that provided real-time inventory updates, 3-D store maps, and the ability to search items by text, voice and photo. Similarly, Lowe’s partnered with Microsoft in an initiative that enables shoppers to view kitchen remodel designs in 3-D, using the Microsoft HoloLens.   Both The Home Depot and Lowe’s also successfully reached small businesses, a factor that also contributed to the success of Costco, the membership warehouse.
Several factors drove the success of drug store chains Walgreens and CVS, as they continued to differentiate from each other. Following its 2014 decision to eliminate cigarette sales, CVS continued to center its brand on health, adding urgent-care centers to many of its stores. Walgreens negotiated to buy Rite Aid, the third largest U.S. drug chain, advancing the plan of UK parent, Walgreens Boots Alliance, to become a global leader in wellness and pharmacy.
With 56,000 convenience stores worldwide, 7-Eleven was perfectly positioned to benefit from several global retail trends, including increased urbanization and the growing preference for smaller stores that are more conveniently located and easier to shop.
The fast food brands in the Top 20 – Starbucks, Domino’s Pizza, and Burger King – each excelled because of combination of category strength and brand-specific initiatives. Starbucks added mobile ordering to all of its company-owned U.S. locations and introduced mobile in Canada and the UK. Domino’s Pizza gained around half of its sales online. Burger King achieved strong same-store growth in its first year under corporate parent Restaurant Brands International, in part by editing its menu to offer fewer but more impactful menu items for its core fast food customers.
Brands outperform categories
The payment brands PayPal and MasterCard benefitted from the transactions driven by the leading retail and fast food brands. PayPal worked to position for the rapid shift to mobile purchasing. In its fiftieth year, and processing transactions from over 210 countries and territories, MasterCard experienced strong revenue growth in all regions worldwide.
Nike increased brand value 26 percent, almost double the overall 14 percent rise of the apparel category, which led the BrandZ™ Global 100 in category value growth. As more people across generations and around the world added sportswear to their wardrobe, Nike profited from a trend it helped invent.
As part of its effort to transition from telecom provider to entertainment–and-content brand, AT&T acquired DirecTV, a broadcast satellite service. AT&T also purchased the Mexican telecom providers Lusacell and Nextel to strengthen its position in the Americas.
Chanel made the BrandZ™ Top 20 Riser ranking with a value increase of 15 percent in a category that declined 5 percent, as luxury sales felt the impact of slower economic growth in China, Brazil and Russia. Chanel enjoyed great popularity in China, partly because of its presence on social media platforms like Weibo and WeChat, but also because it encouraged domestic Chinese spending by lowering prices in China to make them closer to prices in Europe.