How Adidas has bounced back in China

In 2008, the Chinese market share of Adidas was just one percentage point behind American giant Nike. But just when the top spot in China seemed within the grasp of the German company, sales suddenly plummeted, and by 2010 it had fallen to fourth.

Colin Currie, the Adidas chief for Greater China, is now proud to declare that it is back neck-and-neck with Nike, and back ahead of the top two local brands Li Ning and Anta. In 2011, Currie — who was the third CEO for Adidas China between 2008 and 2010, came up with a five-year plan called “Gateway 2015” that is credited with the company's turnaround. Sales in 2014 totaled 1.8 billion euros in China, a 10% increase over the previous year. 

Olympic watershed

To some degree, the Adidas turnaround is simply a recovery from the 2008 Beijing Olympics. The German brand invested between $80 and $100 million to win the sponsorship of the Beijing Olympics. The deal included Adidas providing more than 100,000 uniforms for the Games’ staff, volunteer workers, and the Chinese Olympics team, as well as exclusive rights throughout China to sell licensed Olympic products to the public.

But the sponsorship backfired, requiring a huge capital investment during the run-up to the Games, leaving the company overstocked and with disappointing sales figures and serious cash flow pressure.

Meanwhile, Nike focused on sponsoring single sports and individual athletes. As Charles Denson, Nike’s former CEO put it, “Whether from the point of view of supporting sport or from the commercial and marketing point of view, this policy was more effective and was the best use of our resources.”

The contrasting strategies offer a lesson for the sector, but also had a lasting effect on Adidas' overall performance in the Chinese market, as its share fell by 4% and was eventually surpassed by the local brands.

Learning from the experience, the German group changed the way it sets targets. “Instead of attaching greater importance to the wholesale chain and to increasing our orders, we are now focusing on raising the proportion of goods the retailers actually sell,” says Currie.

Better studies of the chain stores’ sales data, such as the buyers' gender, the goods bought and the price range, the brand now provides much more accurate supply data to its distribution chain.

Data analysis has helped Adidas’ continuous growth over the past five years. “All our dealers used to receive the same catalog and they selected their own orders, whereas now we cooperate with them and help them in choosing their orders in accordance with their regions’ characteristics of climate and population,” says Currie.

Nike model

In 2014, Nike's overall revenues in Greater China was $2.6 billion, still comfortably ahead of Adidas, but the German company is now back to second overall in the market and losing no new ground to the American rival. 

Beyond its proven sponsorship success over the years with the likes of Michael Jordan, Nike's excellence has been fueled by its ability to innovate and offer a broad range of products that satisfy specific market segments.

Currie has been applying some of these same practices, putting more stress on offering a richer portfolio of products that are better targeted with the help of the company's growing use of market surveys.

His first task was to raise market share by combining bolder categories of different product lines. Though 70% of the German group's sales are in sportswear, it needed to develop further in leisure and lifestyle products. The brand's retail outlets also needed to be organized differently to address different categories of the population, as well as different preferences such as specialty stores for women, and specialty stores for outdoor activities, football and basketball, and so on.

New cities

Currie's second task was to explore China's small to middle-sized cities. They will be the fastest growing places for sales in 2015," he said. "We call them the Future cities." By the end of 2014, Adidas had opened 8000-plus outlets in more than 1000 Chinese cities, of which these emerging centers make up a half.

Finally, Adidas has also made it a priority in China to seize the women's market. A 2010 Adidas market survey showed that more and more women consider doing physical exercise not just a sport and fitness opportunity, but also as a prime social activity. In 2013, Adidas launched a special marketing program for women. It was the first time a sportswear brand had done so in the Chinese market. 

By the end of last year alone Adidas had opened three new outlets in China specializing in female apparel. As Zhang Qing, a sports marketing expert, noted "Even if this is not going to raise Adidas’ sales much, it is nonetheless very effective in gaining women's awareness of the brand."

The Chinese market is particularly important to the German manufacturer, even if at present its sales represent only one-tenth of the Adidas' global total. “To achieve global success we have to reinforce our investment in China," says Currie. "We are already imagining what China will be like in 2020.”