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How Amazon’s $315.5B Brand Value Hinges on Merchant Success

Amazon, once again, is the world’s most valuable brand and the merchants selling on its platform are figuring out strategies to continue fueling that success.

WPP and Kantar’s latest BrandZ report detailing the world’s most valuable brands across apparel, luxury, retail and fast food found that not only does Amazon top the list again, but its $315.5 billion value represents nearly 23 percent of the total worth of all 75 brands in the group. Chinese rival Alibaba, in the No. 2 spot, achieved the fastest year-on-year growth, reaching 48 percent to $131.2 billion. To calculate its rankings, the BrandZ report takes into account each company’s financial results along with millions of consumer surveys.

Amazon, Alibaba and other apparel, luxury and retail brands in the top 10—including Nike (No. 5), Louis Vuitton (No. 6) and Walmart (No. 9)—earned their value by investing in customer centricity, whether online or off, WPP and Kantar said. Data and innovative technology are humanizing the interaction between brand and consumer, the companies added.

“We are entering the third era of digital retail as human rhythms meet algorithms enabling retailing to be much more digital but appear more human,” said David Roth, CEO of The Store WPP EMEA and Asia and chairman of BrandZ. “This year’s rankings also signal the increasing importance of Chinese retailers in online and mobile commerce indicated by Alibaba’s rise to the number two position. It is at the cutting edge of where e-commerce, mobile and physical retail intersect with the consumer.”

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Graham Staplehurst, global strategy director for BrandZ at Kantar, echoed the importance of bringing a “human touch” to digital retail.

“Access to unprecedented computing power and near limitless data as well as artificial intelligence and visual and voice technology interfaces gives retailers and brands the ability to absorb and process vast amounts of information but in a way that puts the shopping experience firmly back in the human domain,” he said.

Fresh off its March IPO, Levi’s made the BrandZ list for the first time, taking the No. 74 spot with $2.4 billion in value amid a resurgence in denim’s popularity following athleisure’s lengthy star turn in women’s wardrobes.

Kantar and WPP point to the “democratization of fashion” as the driver behind luxury emerging as the category showing the second-fastest growth, becoming “more relatable and responsible.” The millennial-centered revival at Gucci (No. 11) shows how some heritage houses are refreshing their brand for the modern era, while resale and rental are disrupting access to historically inaccessible wares, the report said.

Fast-fashion brand Zara saw its value drop by 10 percent to $22.6 billion while H&M’s $6.4 billion value represents a steep 39 percent decline from 2018. Growing consumer awareness of the rapid-fire new-drop model’s environmental impact is linked to these brands’ slide down the BrandZ list. The report said “rising concern about the cost of producing, transporting and selling disposable products” will impact the future of these brands going forward.

World Retail Congress chairman Ian McGarrigle said the BrandZ illuminates the differences between brands that are giving consumers meaningful products and experiences and those that aren’t living up to expectations.

“In today’s era of high velocity retail, shoppers don’t care about channels, they care about connections, choice, convenience and speed of delivery,” he added. “In a world where ‘good’ is no longer enough and being ‘average’ is punished hard, retailers are recognizing that change [is] needed. The shopping experience is a key differentiator for brands and retailers whether they have a premium or low price-based offer.”

Amazon, for its part, manages to differentiate on a number of levels, and the variety of sellers committed to its platform earn their share of credit for its growth and success. In the State of the Amazon Marketplace 2019 report, Amazon seller intelligence platform Feedvisor polled more than 800 U.S. adults involved in selling on the e-commerce platform to uncover their sentiment about the influential online leader.

Amazon, the report noted, drives 60 percent or more of the e-commerce revenue for 64 percent of sellers participating in the survey, a significant factor in why it’s the “most coveted platform” versus competitors like Walmart and eBay. With its first $200-billion sales year coming in 2018, Amazon and its lucrative customer base represent big business for platform sellers.

However, life with Amazon isn’t all rosy. Forty-four percent of merchants cite concerns about competing directly with the Seattle firm as it rolls out an increasing number of private-label brands, a figure unchanged from the prior survey in 2018. Amazon carries 433 exclusive or private labels as of March of this year; notably, 68 percent of sellers said this private-label push hasn’t affected their business.

Despite an overwhelming reliance on Amazon, the majority of sellers (55 percent) expressed the feeling that the leading force in American online sales doesn’t care about them. Still, most (73 percent) gave Amazon’s ad platform product high marks. “It is clear that Amazon is taking measures to improve the user experience for sellers engaging in the ad platform and offer additional ways for them to generate demand,” the report said.

A number of sellers have plans to keep growing their Amazon business. Sixty-five percent want to expand their product line and 30 percent are looking to sell on one of Amazon’s sites outside of the U.S., a nod to the importance of building an international audience. Holiday shopping is important to Amazon—and critical to its merchants, too. Sales on Black Friday, Prime Day and Cyber Monday garner half of the year’s earnings haul for 74 percent of surveyed sellers, the report said.

A company that’s grown as quickly as Amazon will inevitably attract regulatory and social scrutiny. Just recently the company came under fire for trashing 3 million perfectly good products in France, joining companies like Burberry that would rather destroy their goods than “dilute” their brand.