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TJ Maxx’s Brand Value rises 79%

10 March 2017
This article is more than 4 years old.

· TJ Maxx’s brand value reaches US$5.6 billion

· Alibaba is the fastest growing retail brand, almost doubling in value

· Amazon, the most valuable retail brand, grows 53% to US$106.4 billion

Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. Brands are first evaluated to determine their power / strength (based on factors such as marketing investment, familiarity, loyalty, staff satisfaction and corporate reputation) and given a corresponding letter grade up to AAA+. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand, which is projected into perpetuity to determine the brand’s value. The world’s most valuable retail brands are ranked and included in the Brand Finance Retail 50 2017.

TJ Maxx (known as TK Maxx in Europe) has grown rapidly this year, with brand value rising 79% to US$5.6bn. A stronger trend for cost consciousness in western markets, originally initiated by the financial crisis, has been sustained even as the economy has recovered. TJ Maxx’s reputation for exceptional value is key to its success and consumers’ affinity for its brand. However just as significant is the fact that it is a gateway to the World’s most powerful and desired apparel brands for a vast swathe of consumers who could otherwise not afford them. Ross Dress for Less operates in a similar way and is also growing strongly. Like TJ Maxx, it has minimal online presence, relying on its buying and merchandising expertise to sell designer goods (in addition to own brand) for up to 70% less than conventional retailers. Its brand value is up 71% to US$5.278bn.

Nudging slightly ahead of TJ Maxx’s growth, Alibaba’s brand value has nearly doubled, making it this year’s fastest growing retail brand. Valued at over $34.8 billion, the online marketplace continues to thrive in China and globally. Alibaba has created a fair and open portal for small businesses and enterprises. Its success stems from the opportunities to both open up and simplify commerce for Chinese communities, particularly rural ones. Its service has clearly underpinned brand value growth at home, but in order to accelerate growth abroad by aiding brand recognition, it is investing in marketing communications including joining McDonald’s, Coca-Cola and Visa as a major sponsor of the Olympics Games.

Amazon is the world’s most valuable retail brand. Its strong 53% brand value growth this year meant Amazon was close to becoming the most valuable brand across all industries. For now, with a brand value of US$106.4bn it sits just behind Google (US$109.5bn) and Apple (US$107.1bn). The firm is growing strongly as it continues to both reshape the retail market and to capture an ever larger share of it. Its brand value is already nearly double that of second-placed Walmart. Amazon Fresh, its grocery service, is still relatively limited in scale but this year began operating overseas for the first time, serving Central and East London initially. Amazon has stated it will create 100,000 jobs in the US over the next 18 months. Such confidence suggests that Amazon may well become the most valuable brand in the world in 2018.

IKEA, the world's largest furniture retailer, is another brand that has always been very price-led and reliant upon physical sales. However, it is making more concessions to the digital revolution than TJ Maxx and Ross, expanding its click-and-collect network and opening more of much locations in than traditional stores in 2016. IKEA has been making plans to accelerate its expansion in China and India as it seeks to boost sales by almost 50% over the next four years. IKEA draws upon its national heritage more than almost any other major firm for its brand positioning. Its visual identity and brand personality are strongly associated with Sweden’s reputation for quality manufacturing, simplicity, design expertise and social modernity. However, the IKEA brand is now owned and managed from the Netherlands rather than its how country. Managing intellectual property from a different jurisdiction can be a sensible strategic move for many brand owners, however the potential repercussions for consumer-facing brands in particular must be carefully assessed against the financial benefits.

ENDS

Note to Editors

Brand values are reported in USD. For precise conversions into local currency values, please confirm rates with the Brand Finance team.

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Media Contacts

Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Associate Communications Director
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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