Adidas has been focusing on expanding its market through a renewed approach to marketing and product innovation over the recent years. The sports shoes industry has grown highly competitive and adidas is aggressively focusing on marketing and branding to cement its position in the global market. Adidas is a leading rival of Nike. However, there are several more brands contending for market share in the sports shoes and apparel industry including Under Armour, Puma, and other similar brands like New Balance, Lululemon and ASICS. Nike is an established leader in the sports shoes industry and a renowned marketer. In order to maintain its competitive edge and market position against a market leader like Nike, Adidas is now focusing heavily on strengthening its credibility and market image. In 2021, the company announced a new strategy called ‘Own the Game’. There are three main focus areas of this strategy which include establishing brand credibility, creating a unique consumer experience, and making its operations more sustainable. The new strategy has a slightly long-term focus which is to expand market share by 2025.
However, Adidas is engaged in an aggressive battle against mighty opponents where most players are aggressively investing in digital technology to achieve higher market penetration, customer reach and to offer their customers a superior experience. Adidas has created its new strategy to drive sales and profitability higher where most of sales growth, around 96% is expected to come from five key categories: Football, Running, Training Outdoor and lifestyle. Customer experience and customer relationships will also play a key role in helping the company expand its market share faster. Apart from that, a key focus of the plan will be the digital transformation of the company. The company will invest heavily in strengthening its ecommerce operations as it expects the Direct to Consumer channels to account for a substantial part of the company’s revenues in the coming years. The company expects the Direct-to-Consumer channels to account for around half of its total net sales by 2025. The ecommerce channels will also drive above 80% of its targeted top line growth. Key focus areas of the ‘Own the Game’ Strategy There are five important focus areas that Adidas is targeting through its new Own the Game Strategy. They include credibility, experience, sustainability, customer experience, digital and organization wide innovation. How the company will act on the five pillars is detailed below:
Credibility: A clear brand architecture is an important step towards growing brand equity and achieving higher clarity in the market place. The brand architecture helps the target audience relate with the brand and its products. It refers to how the products in the brand’s portfolio are organized. Adidas plans to improve its market position in the sport and lifestyle categories through a more clear brand architecture. The company’s focus will remain on four key product groups in the Sports category including Football, running, training and outdoor. Adidas is also growing its focus on improving the product portfolio in the athleisure category since customer demand for such products has kept growing in the recent years. Apart from these things, the company’s focus will be on growing the range of Adidas Originals in the premium segment to achieve stronger differentiation. Adidas expects that the five key categories including running, training, football, outdoor and lifestyle categories will drive more than 95% of the company’s revenue growth. The company will also invest in attracting more female consumers. Improving customer experience for female consumers and the portfolio of products made for female customers will help the company improve the sales among female customers. Between 2021 and 2025, the company expects to improve the sales of products for females at a mid-teens rate. All these steps will help the company improve its credibility among consumers globally.
Customer experience: The focus on customer experience needs to be higher since customers globally want a more personalized shopping experience tailored to their preferences. Adidas needs to transform into a direct to consumer led business. Its mix of ecommerce and physical channels centered on a membership model will play a critical role for the company in the future. Its digital channels will be driving most of the company’s sales growth in the coming years. By 2025, the digital channels will generate more than half of the company’s net sales and will be responsible for more than 80% of the company’s growth in net sales. Between 2021 and 2025, Adidas expects to more than double its sales from ecommerce channels. It will require higher investment in its ecommerce capabilities. The company expects to grow its ecommerce revenues which were higher than 4 billion Euros in 2021 to between 8 and 9 billion Euros by 2025. Apart from strengthening its ecommerce capabilities, the company will also expand its membership program to grow its ecommerce revenues. Adidas has around 150 million members currently and expects to more than treble the number by 2025. According to its plan, the number of memberships must reach around 500 million by 2025.
Adidas will also continue to invest in improving its instore experience through digitization of stores. These stores will be digitized will full-fledged omnichannel capabilities. Adidas will also focus on higher customer engagement in the megacities which have been a central focus of its growth plan over the past several years. The company is now focusing on more such cities and doubled the number of megacities included in its plan. The following cities are going to be the main target of Adidas in terms of customer engagement and membership expansion: Tokyo, Shanghai, Paris, London, New York, and Los Angeles, by adding Mexico City, Berlin, Moscow, Dubai, Beijing, and Seoul. However, apart from these cities, the company has also decided to grow its focus on key market segments including Greater China, EMEA and North America. These three geographical segments are expected to drive more than 90% of the company’s growth until 2025.
Sustainability: Adidas has already been focusing on sustainability for more than a decade. It has remained an integral pillar of its brand philosophy over the past several years. However, the company is now planning to significantly expand its sustainable offerings and its commitment to sustainability programs in its business operations. Currently, it has 60% of the products in its portfolio made up of sustainable materials which it plans to grow to 90% by the year 2025. The company is planning to further innovate its three-loop system which includes: – Recycled loop: made from recycled materials. – Circular loop: made to be remade. – Regenerative loop: made with natural and renewable materials. Over the past several years, the company has been researching fully recyclable or biodegradable materials. By 2024, the company aims to only use recycled product by 2024. The company will also grow its focus on marketing and promotion of sustainable materials. Adidas will also rollout its takeback programs at a larger scale. The brand has committed to reduce its CO2 footprint per product b 15% by 2025. It aims to achieve carbon neutrality in its operations by 2025 and total neutrality by 2020. It is also working closely with its supplier partners to reduce energy and material consumption and increase the use of green energy resources.
Digitalization: The company plans to invest around 1 Billion Euros by 2025 to faster digitalize its processes. It plans to first digitalize the core processes in its value chain including sourcing, creation and sales. By 2025, the company expects to generate a large part of its net sales from the products that were made and sold digitally. This will require investment in the expansion of its tech team and increase in its data and technological capabilities. Adidas had planned to hire at least 1000 extra tech personnel in 2021 alone. It is also investing in a new ERP system S/4 HANA.
Innovation: Continuous innovation is the key to faster growth in all industry sectors including the sports shoes industry. Companies including Adidas, Nike and others like Lululemon are investing in continuous innovation to grow their market share and revenues faster. Adidas is also focusing on making innovation a part of its company culture. It has already demonstrated superior performance through innovations like Boost technology in the past. Some examples of more recent innovations by Adidas include Futurecraft.Strung and recyclable versions of the popular lifestyle silhouette Stan Smith. Adidas is also working on creating more innovations that will make it easier for the company to develop more sustainable products and processes.