Disclaimer: The English version is an authorised translation of the original article in Mandarin for informational purposes only. In case of any discrepancy, the original Mandarin article by Ah Nel can be found here.
Preface 1: Due to my working premise, knowing more about adidas has become part of my routine. This is a summary of sorts of their annual magazine in simple and easy words.
All images used for this article were taken from the annual magazine, the link is available at the bottom.
Preface 2: The annual magazine can be easily found on adidas’ official website. It is open to the public and there is nothing confidential in this article.
Let the data speak for itself. On 24th June 2016, the closing price for adidas’ share dropped almost 3% due to BREXIT, settling at €119.85.
The chart above shows the trend of adidas’ stock value, beginning at €70.99 and ending strong at €119.85 over a 12-month period, or a 68.83% increase.
In a nutshell, you would have earned a net profit of RM68 if you invested RM100 one year earlier.
What does the increment mean?
Just put yourself in this situation: imagine you told your dad that you are buying a stock with a 68% rate of return and you are trying to invest in the stock as heavily as possible. Trust me, you will probably get beaten up real bad or he’ll think you must be mad. The stock simply sounds too good to be true.
But it is true. Yes, it means adidas’ stock has just gone crazy. Crazy good.
They stressed this point – displayed in the image above – at the start of its 2015 annual report.
Rome wasn’t built in one day, and neither was adidas, but we can now say they have found their direction. It is their golden time to harvest all their effort and investment.
Today, let me tell you how adidas became such a strong player in the sneaker industry. Firstly, what is the brand good at?
After so many years, finally adidas shows it’s eager to conquer the world
This is very important as they found their confidence and pace after a bunch of failures and experiments. As the common saying goes, confidence is the key to success.
I would take it as a joke if adidas said this one year ago, but I wouldn’t take it as a joke now.
Adidas is now experiencing a healthy growth worldwide.
They’ve seen tremendous growth over the last year, especially in Northern America (21%) and Europe (29%).
Furthermore, these two regions have a major influence on international fashion trends and, by extension, the design and retailing of fashion products. Having a strong foundation in both places will definitely help them in the future.
The debut of the Ultra Boost running shoe
I first thought the Ultra Boost was just ‘another running shoe’ and not that big of a deal. I realised I underestimated the product when it came under the spotlight in the annual magazine.
Put it this way, Ultra Boost doesn’t serve as a random sneaker; both the streetwear and running communities credited the shoe highly.
To be honest, I don’t know why Ultra Boost alone gave a huge boost to adidas. However, it reminds me of the Nike Flyknit Racer that has been selling for 3 to 4 years with no sign of slowing down. We can be safe to assume that adidas will milk the Ultra Boost silhouette over the next few years.
Comparable sales contribution between adidas’ footwear and apparel product categories
One thing adidas mentioned in the annual magazine is that they are enjoying a good sales ratio between their three product categories. Sneakers took up 49% while apparel generated 41% of net sales, with accessories contributing 9%.
Although jerseys play an important role in their business game, 41% is still a surprisingly good figure. The sales ratio shows evidence that while adidas sold a ridiculous amount of sneakers, their apparel line is hardly lagging behind either.
Even though there is stiff competition from H&M, Uniqlo and Zara on the apparel side of things, adidas still remains strong despite the fact that the price point of their products are generally higher than average.
NEO focusing on fast fashion.
Brands like H&M, Uniqlo, Zara and Topshop are great examples of fast fashion. Other than doing traditional fashion styles, they have also dabbled in sports-oriented fashion. H&M, as an example, has done rather well with its sports fashion line.
Nike has dominated over the last two decades in the sports industry, but adidas is planning to steal the throne from Nike by using NEO. We are expecting more NEO outlets in the near future, and that their price points will steadily lower until you stop buying Uniqlo.
Adidas Original is looking to be the ‘Hype’
Regardless of whether you are a sneakerhead or not within the sneaker culture, NMD, Yeezy, Superstar and Stan Smith must have been spamming your social media for the past two years. If not, I think you are totally out of touch.
adidas’ football line still comprises a big portion of revenue.
With over €2.2 billion secured on the back of football, I’d say they’re doing great.
Reebok’s marketing in the right position.
It seems that since adidas acquired Reebok in 2006, the brand will be focusing on North America and the brand’s position and strategy were well planned by adidas.
Reebok has been dominating the crossfit field, though considering that’s their forte it’s no surprise that they are leading in that regard.
Spartan Race is an annual event organised by Reebok and it has become one of their most important programs with significant growth seen every year.
Pumpfury and Furylite are silhouettes that is still pretty valuable and going strong with both silhouettes selling over one million pairs over the last year.
Open for collaboration.
Adidas is very into collaboration now but in a different way.
They allow their collaboration partner to utilise any resources available to explore new designs and ideas. Shoes like Yeezy was born in this way.
With a daring and bold mindset, they manage to build their own hype train.
Harvest phase for their R&D.
With a well-developed R&D department, Y-3 can release anything that just got invented to test the waters. That’s one reason why Y-3 is always pricey and in limited quantity, so adidas will have to bare the cost for R&D if the product doesn’t work well.
If Y-3 products manage to pull it off in the market, then it is time to mass-produce by implementing the idea to adidas’ products.
This has always worked for adidas.
Now we have Y-3 Sport, phenomenon like adidas’ design will look like Y-3 will happen, but with a more affordable price.
What I’ve written so far is enough to prove how strong adidas is and going to be, and I really worry about what Nike should do to stay in the competition.
Lets talk about basketball.
Adidas rarely dabble in the basketball space. Still, we can see something is going on with adidas basketball. Letting go of the NBA jersey sponsorship to cut costs. Signing more star players like Damian Lillard is good for them, as he is slated to be the new “Kobe”.
Although adidas didn’t mention a single word about James Harden’s signature shoe, I believe that they did it on purpose. There is a high possibility they are using the “Hunger Marketing” tactic, to starve the public of news on the release, and later come out with a bang.
I believe there will be tons of news about adidas basketball in 2017.
Others
It’s a shame adidas couldn’t dominate other sports fields like American football, rugby, tennis, baseball, volleyball, cycling, boxing and others. They will focus on what they have and wait for an opportunity, adidas said.
Let us know what you think about what has been said about adidas in this article in the comment section. Do you agree? or disagree?
