Adidas may expand into third tier, small cities

By Yu Tianyu (China Daily)
Updated: 2010-06-03 10:07
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BEIJING - Adidas AG, the world's second-largest sporting goods maker after Nike, said it expects to improve its performance in China by aggressively restructuring its business with more outlets in smaller Chinese cities and more fashion-oriented products.

Adidas may expand into third tier, small cities

An oversized version of adidas' official match ball for the 2010 FIFA World Cup is on display at the World Expo in Shanghai. Adidas will sponsor 12 teams playing in the tournament. [Xiao Yang / for China Daily]

"Due to the booming Chinese economy and great consumer confidence, and the momentum generated by the 2008 Beijing Olympic Games, we are very optimistic about our future performance in China," Christophe Bezu, managing director of the adidas Group in China, told China Daily.

China has already become the second-largest market for adidas worldwide and sales in China made up 9 percent of its global sales in 2009, he said.

Herbert Hainer, the company's CEO, previously said it expects sales in China to "soon" reach 1 billion euros ($1.22 billion).

However, the German company reported a 10 percent revenue decline in China to 967 million euros in 2009 and a 20 percent drop in the first quarter of this year. Officials declined to discuss country-by-country financial figures for Asia.

Bezu attributed adidas' gloomy performance here to over-optimistic sales forecasts made prior to the Beijing Games and the financial crisis.

Bezu said that in 2010, the focus would be on further reducing inventories in the first half of the year and aiming to reshape their China strategy. Adidas decreased its inventory globally by 20 percent in 2009.

At the end of 2009, adidas had around 5,400 stores across China, and Bezu said the company would continue to invest in the market.

With a good presence in China's first- and second-tier cities, adidas is rolling out plans to deploy more outlets in third-tier and smaller cities. Bezu said it is focusing on around 680 such cities with more self-owned outlets there. The plan is to be released by September.

Bezu said the company will build supporting centers in 13 to 15 cities, with mixed functions including a local office, logistics' platform or supply chain center, serving surrounding areas.

For the adidas Group, China will continue to be an important manufacturing and sourcing market with over 40 percent of all products being produced here.

A report by Bergstrom Consulting found that the 15 to 25-year-olds in China want to be more individualized, and are far more fashion-conscious than their parents.

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"Consumers in China have become more sophisticated in terms of the brands they wear, and more fashion-oriented in both sports and leisurewear. This makes China a very important market for adidas," said Bezu.

The adidas by Stella McCartney collection, which is made in cooperation with English fashion designer Stella McCartney, is available in 31 outlets in 15 cities around the nation. "We are also excited about the future of the Y-3 brand in China, which was developed by Japanese designer Yohji Yamamoto and adidas," Bezu said.

Recently Reebok International Ltd, part of the adidas Group, announced a global alliance with Giorgio Armani and its Emporio Armani label to create a special collection combining its active style with sport and technology - the EA7.

"We are very much looking forward to working with a fashion house as renowned as Giorgio Armani," Bezu said.

As for the 2010 FIFA World Cup, which is due to kick off in South Africa on June 10, Bezu said sponsoring 12 teams playing in the tournament, the company expects sales of 1.3 billion euros in soccer-related products compared to 1.1 billion euros in 2006.

The company has launched the official match ball called the Jabulani, made to allow for maximum control, stable flight and perfect grip under all conditions.