Despite the number of active online shoppers steadily increasing over the last year, some online retailers are failing to maintain relevance, in an increasingly monopolised sector.
This is according to the third edition of the Brand Finance Global 500 report, released at the World Economic Forum in Davos last week.
The report, which revealed that Amazon for the first time broke the $200 billion-value mark, topping the chart as the most valuable brand across the globe, also found that brands operating in the e-commerce space are seeing contradicting results.
While the American multinational e-commerce and cloud computing firm was rated as the most valuable brand across the globe, the novelty of operating in the digital space is “fizzling out” for some online retailers which have started to lose brand value, while bricks-and-mortar chains, which have learnt to successfully adapt to the changing marketplace, are consequently making gains, notes the report.
“In stark contrast to Amazon’s success, eBay’s brand value has continued to erode, falling 9% to $8.2 billion. Despite the number of active buyers steadily increasing over the last year, reaching 183 million, eBay is failing to maintain relevance in an increasingly monopolised sector.
“Attempts to diversify and introduce new revenue streams, through eBay payments and promoted listings, and potential spin-offs in the pipeline, could mean the brand fares better in the coming year,” states the report.
Forty-four retail brands feature in this year’s ranking alongside Amazon, with a combined value of nearly $800 billion, making the sector the third most valuable behind tech and banking.
“Despite the unprecedented disruption caused by e-commerce, the popular assertion that entering digital operations brings instant success while bricks-and-mortar stores are doomed for extinction is being proved wrong,” comments David Haigh, CEO of Brand Finance.
“As digital operators find they need to remain attentive to consumers and traditional retailers, such as Walmart, and successfully adapt to change, we are back to normal as all players realise that ultimately the customer is king.”
While Amazon retains previous years’ title of world’s most valuable brand, it may encounter challenges to the growth of the company’s core operations, potentially resulting in brand value stagnation in the future, adds Brand Finance.
In November 2019, it was announced Nike would no longer sell its merchandise on the platform, and will develop its own direct sales channels.
“Amazon may have to contend with other big brands following Nike’s lead, which would undermine its reputation as the ‘everything store’. Another potential sticking point is the company witnessing environmentalist opposition in Europe, to backlashfrom local retailers in India, to saturation of China’s e-commerce market by Alibaba and its subsidiaries – matching globally the status that Amazon enjoys in the US may prove difficult,” explains Haigh.
In the traditional retail space, American giant Walmart (up 14% to $77.5 billion) has seen its brand value resurge, jumping up three places and entering the top 10 once again.
As well as committing to its expansion programme in key markets, Walmart has focused on an innovative digital proposition, through a partnership with Microsoft and with the launch of Alphabot – robots that pick and pack online grocery orders at high speeds.
Steady SA growth but low numbers
E-commerce forecasts by World Wide Worx’s Online Retail in South Africa 2019 study show online retail will break the 2% mark of total retail revenue in 2022 and 5% by the mid- to late-2020s.
The report found that online retailers are unwilling to take big bets on e-commerce, with only one in five online retailers re-investing more than 20% of their profit back into their business.
Arthur Goldstuck, head of World Wide Worx, says while online shopping is growing in SA and year-on-year growth has not dropped below 20% since 2003, there is: "Still a long way to go before online retail is normalised and becomes a mainstream natural route to purchasing."
Meanwhile, Derrick Chikanga, senior analyst of IT services at Africa Analysis, comments that while it’s difficult to put a figure onthe percentage of e-commerce users in SA, it remains very low at this stage.
“Most people still prefer making physical payments rather than paying through e-commerce platforms. The limited exposure to such platforms, particularly within low income households, is a key challenge to the uptake of such services in the local market,” he points out.
Chikanga is of the view that local e-commerce players are faced with certain challenges, such as limited exposure of their services to most local consumers, contributing to low utilisation of their service.
“Global sites such as eBay and Amazon experience significantly higher traffic volumes when compared to local sites. These are well known platforms that service customers at an international level and thus experience high traffic volumes across all geographic regions,” adds Chikanga.
Mirroring the situation in the retail sector, many traditional hoteliers are seeing significant growth, while brands operating in the digital online space see mixed results, the Brand Finance report further found.
Hilton Hotels & Resorts remains the sector’s top brand and one of the fastest-growing in the ranking overall. Hospitality group Marriott has also seen substantial growth over the past year, recording a 20% uptick to $6 billion.
“Marriott’s pace of brand value growth is comparable to Airbnb’s, up 28% to $10.5 billion, while another digital player – Booking.com – saw a 15% decline to $10.2 billion this year.”
Share