Reporter | Qin Siyue
Edit | Shi Yiying
"Our mall has five floors, and there were three Adidas stores, two Adidas Sports and one clover. Now there is only one Adidas movement left, which is being renovated behind closed doors," the head of a shopping mall in Nanning, Guangxi Province, told Interface News, "After the extra store location is re-attracted, it will be settled in some national tide stores or used for store expansion of other brands." ”
In a local mall in Zhuhai, Guangdong Province, Adidas's store is almost unpopular on weekdays, even on weekends. The clerks had no one to receive and had to take out their mobile phones from time to time.
This is the current situation of Adidas offline stores in China's second- and third-tier cities: stores are reduced, and there are few customers who survive stores.
Adidas's operation in the Chinese market is hesitant, while on the other hand, the number of stores of domestic brands is rising all the way.
Taking Li Ning's second-quarter data as an example, as of June 30, 2022, Li Ning had a total of 5937 offline sales points, a net increase of 65 over the end of the previous quarter, and this figure does not even include 1175 Li Ning YOUNG brand sales points.
In fact, the decline of offline channels is only one of the weak performance of Adidas in Greater China.
On August 4, 2022, Adidas released its second-quarter financial report showing that its second-quarter revenue was 5.596 billion euros (about 39.2 billion yuan), an increase of 10.2% year-on-year; Net profit was EUR 309 million, down 24.2% year-on-year. Coincidentally, in Greater China, its revenue in the first and second quarters fell by 35% year-on-year, and it has been negative revenue growth for five consecutive quarters.
Adidas CEO Kasper Rorsted said in an interview that Adidas' revenue in Greater China has plummeted, and in addition to being affected by the new crown epidemic, Adidas itself has "made mistakes".
- The "sandwich cookies" of fried old rice, Adidas was embarrassed
In the earnings report, Adidas blamed the decline in business in Greater China on the "Xinjiang cotton" storm a year and a half ago and the repeated epidemics in more than a year.
For the full year 2021, Adidas generated full-year revenue of 21.234 billion euros ($21.6 billion), an increase of 15% year-on-year. Gross profit was EUR 10,765 million, an increase of 17% year-on-year, and gross margin was 50.7%.
Nike's fiscal year ended May 31, 2022, had revenue of $46.7 billion, up 6 percent year-over-year. Full-year net profit increased 6% year-over-year to $6 billion and gross margin improved by 120 basis points to 46%.
The two major international brands that have fought against each other for nearly 30 years are now facing difficulties in the Chinese market, but in the most recent full fiscal year, Adidas's revenue is even less than half of Nike's.
In fact, whether it is the confrontation between the global market and Nike, or the Inability of the Chinese market to cope with the collective rise of domestic sports brands. Adidas is losing ground, as Rothstad puts it, "We don't know enough about consumers, so we leave room for Chinese competitors who are doing better." ”
After the international sports brand entered the Chinese market, the positioning was clear, Nike took the direction of professional sports, and Adidas was a trendy fashion sports style. However, with the improvement of the overall income level of the people, the thinking of consumer groups is also quietly changing, and without technical "barriers", it is difficult for consumers to pay for the so-called "brand".
In the Chinese market, Adidas' product updates have not kept pace with changes in the consumer environment, and technology and design are lagging behind.
Sneaker collector Lai Yu began collecting sneakers in 2015 and has collected nearly 100 pairs of sneakers from different brands so far. According to him, he has recently purchased fewer and fewer Adidas sneakers.
Lai Yu told Interface News: "I feel that the style of Adidas in recent years is compared to Nike or many domestic brands, the style is old, there is no innovation in technology, the design is not good, and it comes and goes or fried classics." I feel that without Kanye's Yeezy series to support, Adidas shoes really no one bought. ”
Lai Yu showed a screenshot of his usual trendy online shopping app. The pictures show that some of Adidas' highest-selling shoes are the classic adidas originals Superstar and Yeezy series.
Overall, the current stratification of Chinese consumers is obvious. On the one hand, high-income groups favor niche, high-end goods and services; On the other hand, the role of brand effect in the mass group is getting weaker and weaker, and this group also tends to choose more cost-effective products.
Therefore, in the field of sports brands, Adidas fell into the embarrassing situation of "sandwich cookies". There is a gap between high-end sports brands priced in four or even five figures; Compared with domestic brands, there is no cost-effective advantage, and the design of the latter is even more favored by local consumers.
Public data show that the investment of domestic brands in product research and development design is gradually increasing.
Taking the domestic head brand ANTA as an example, in recent years, the brand has applied for more than 2,600 patents, has more than 60 scientific research institutions and more than 200 scientific researchers in more than 20 countries and regions around the world, and will invest more than 4 billion yuan in research and development costs in the next 5 years.
After 2015, Adidas, in the Chinese market, the money is spent on advertising and marketing. Unfortunately, the large investment in advertising does not seem to have brought the desired return. The star spokespersons who have signed large votes in a row have also terminated their contracts at the first time of the outbreak of the "Xinjiang Cotton" incident.
In fact, the signing of celebrity spokespersons with goods, in the Chinese market itself has a paradox, taking Taiwanese artist Zhang Junning as an example, its hyped high education and sportsmanship are doubtful, but in the endorsement matrix of Adidas at that time, her status is even higher than Yang Mi, who has obviously higher traffic and stronger ability to carry goods, which is intriguing.
Simon Peel, global communications director of Adidas, once said: "We invest a lot in digital marketing, but only 23% of these spending is invested in the brand's advertising, and the effect is not satisfactory." ”
Lai Yu told Interface News: "Like Li Ning's basketball shoes and Anta's running shoes, the performance is good, new and fast, and cheap. Adidas now seems to us to eat the old Ben. ”
- Inventory that can't be sold "big mountain"
The stagnation on the product has led to an inventory backlog that has become the most headache for Adidas at present.
According to Adidas's 2019 financial report, at the end of 2019, Adidas's inventory reached 4.85 billion euros, while the cash flow was only 873 million euros, which shows that the inventory problem was very difficult before the epidemic.
The outbreak that began in 2020 has exacerbated the problem by the lack of capacity. Adidas' latest second-quarter earnings report showed that brand inventory increased by 35% by the end of the quarter, worth nearly 5.5 billion euros.
As Adidas moved its production plant to Southeast Asia a few years ago, Adidas' product sales in the past two years have been deeply affected by supply chain shortages.
Generally speaking, the cycle of sneakers from design to factory to store shelves takes at least 18 months. Supply chain and capacity shortages extended the cycle by two to three weeks. Adidas has thousands of sneakers that need to be sold on the shelves every year, and the time to market is very short. A pair of shoes is delayed for half a month, and when it accumulates, it becomes a "mountain" of inventory.
In a number of Adidas stores located in the center of Shanghai, perhaps because of the hot weather this summer, there are only a few scattered customers in the huge storefront, and a summer promotion sign is placed at the door, which reads "Short-term two pieces 6.9% off, three pieces 60% off" Most footwear products are also labeled with discounts, with discounts ranging from 7-8%.
In second- and third-tier cities, the scene is even more bleak. The person in charge of a dealer from Zhuhai, Guangdong Province, told Interface News: "One is that no one came, and the passenger flow was much less. The other is that there is a lot of inventory. In the past, when it sold well, we also had to contact other stores in the same city to help transfer goods to customers, and now many goods cannot be sold without discounts. ”
At present, the largest distributor of Adidas in China is Taobo Sports, and its 2021 financial report shows that the annual revenue of Taobo Sports is 31.8 billion yuan, down 11.5% from the previous fiscal year. Among them, the revenue of the "main brand" section of Nike and Adidas fell by 12.3%. The number of stores nationwide decreased by 311 for the whole year, and the revenue of retail business fell by 14.2%.
The series of butterfly effects brought about by the relocation of production plants during the epidemic have made Adidas difficult to predict. On the other hand, several overseas sports brands that were still able to rise against the trend in China last year have all increased their localization operations.
Take the American sports brand Skechers as an example, Skechers handed over a report card of 24% year-on-year growth and revenue of 22.8 billion yuan in 2021.
In August this year, the first phase of the Skechers China Logistics Center project was officially launched in Taicang, Jiangsu Province, and the foundation stone of the second phase of the project was also completed. It is reported that the total investment in the first and second phases will exceed 3 billion yuan.
Skechers currently sells 85% of its products in China, and at a time when brands are struggling with supply chain shortages and products that cannot be transported, Skechers' latest products have been listed early in the stores and come to consumers.
Also doing well is the Canadian brand Lululemon. Lululemon, whose number of stores in China has surged in the past two years, has his own "store philosophy".
Celethe Burgoyne, senior vice president of lululemon branding, said in an interview: "Our store is not just about selling things. ”
Unlike Adidas, lululemon's stores in China are all directly operated by brands and do not join. In addition to selling things, lululemon's store will regularly invite domestic yoga KOLs to hold yoga classes, stabilize the yoga community where the store is located, and maintain good contact with the target group.
Although there is no overwhelming advertising, and the annual marketing expenditure accounts for only 2% of the total expenditure, Lululemon still wins word of mouth through word of mouth among consumers, and its "community marketing" model has become the highlight of marketing innovation of sports brands in recent years.
On June 13, 2022, the US stock market closed, lululemon's market value exceeded $50 billion, while Adidas's market value on the day was only $33.814 billion, and the second position of the sports brand in the world has been lost.
Unable to sell offline, Adidas began to accelerate the development of e-commerce DTC channels. The second quarter financial report shows that Adidas' DTC business is one of the few sectors that has grown against the trend, and the revenue from e-commerce accounted for 20% in the quarter.
However, in the World's Leading Chinese Market in the e-commerce battlefield, Adidas does not have an advantage in the head-on confrontation with domestic brands.
The most recent e-commerce promotion was the 618 promotion that opened pre-sales in late May. According to the intelligence data of the magic mirror market, the pre-sale of Adidas was rarely lost to the domestic brand ANTA, and the pre-sale amount on the first day was only 140 million yuan. In the final 618 report, Nike pressed Adidas to the top of the sports brand list, but the remaining three seats of the TOP5 were occupied by FILA, Li Ning and ANTA respectively.
It is worth mentioning that after the end of 618 last year, Tmall launched a list of consumer operation health in different industries to evaluate brands from multiple dimensions.
In addition to ranking first in the total number of members, Adidas only ranked fifth and seventh in the two data of population relationship deepening rate and member activity rate, and the user stickiness decreased significantly. In terms of the total number of operable people, Li Ning and Anta, the two domestic leaders, have both surpassed Nike and Adidas and occupied the top two.
- Infighting is over, Adidas and other global rescue Of China?
For today's dilemma, many "former Adi people" who have left Adidas China are not surprised. In the Chinese market, the crisis of Adidas began much earlier than March 2021.
In March 2022, at the same time as the 2021 annual financial report was released, the management of Adidas Greater China also underwent a major change. The brand announced the appointment of Adiran Siu as Managing Director for Greater China. Previously, Xiao Jiale was the CEO of Urban Beauty, a Chinese lingerie brand.
A former General Manager of Adidas' Hong Kong branch and Senior Vice President of Greater China, Xiao was a powerful assistant to his predecessor, Colin Currie, in the role.
A native of Malaysia, Gao joined Adidas in 2005 and was promoted to Managing Director of Greater China in 2011. During his tenure, Gao Jiali led the "Road to 2015" China strategy and doubled sales in Greater China in 2015, and the Asia-Pacific market quickly became Adidas' largest, fastest growing and most profitable market.
In September 2020, Gao Jiali suddenly announced his imminent departure in an internal meeting. It is reported that due to the suddenness of the incident, many company insiders did not know the news, after all, Gao Jiali's business performance during his ten-year tenure was very good.
Jason Thomas took over the role after Gary Gol officially left Adidas' head of Greater China in late 2020. After he took over, Adidas Greater China ushered in a shock within the region, the turnover rate was extremely high, and a group of people with no background in the sports industry joined the company and took over important positions.
Xiao Jiale returned to Adidas from Urban Beauty, while Thomas was transferred to senior vice president of global operations, and his senior director of brand department and senior director of group public relations also resigned.
A speculation afterwards was that Gao Jiali did not meet the authority of the Chinese market and hoped to take the entire Asia-Pacific market as its authority, and had a disagreement with Adidas globally. But it is clear that Gao Jiali and his former core team have proved that the Chinese market is not for everyone.
Frequent personnel changes are also one of the main reasons why the outside world generally believes that Adidas Greater China has been unable to do so in the past two years.
Adidas, which has just celebrated its 73rd birthday, has operated in the Chinese market for many years and has an unshakable consumer reputation and market foundation. But now faced with internal and external troubles, Adidas must make a change.
Adidas CEO Rothstein said that he still believes in the future growth space of the Chinese market: "Greater China has always been one of the most important growth markets for the brand, and Adidas will come back." ”
But the problem is that in the 20 years from 2000 to 2020, China's sports consumer market, the cake is constantly growing, so everyone can come to a piece of the pie, and in 2020, the epidemic began, the market size has reached a relatively stable state, and it is not so easy to recover the lost land.
Rothst also proposed that sales in the Chinese market are still difficult to recover in the short term, "if the response of the Chinese market is less than expected, it may undermine Adidas's revenue target by 2025." If the initial assumptions change permanently, we will also have to adjust our goals. ”
The core of the global sports consumer market is no different, and ultimately it must fall on improving product power, brand power and efficient operation.
(Lai Yu is a pseudonym in the text)