Market Research: Adidas in China
Basic Background of Adidas in China
The company Adidas Sports (China) Ltd entered China and headquartered in Shanghai in 1997 with a core business of men’s and women’s sportswear and footwear. The company also entered the market of children’s wear in 2001. The CEO just announced the opening of 3000 new stores in China by the end of 2020.
According to statistics, as of April 2015, Adidas has a national distribution network of around 8,800 stores, of which 500 are stores for kids, spread throughout 550 cities in China. Over half of these stores are located in first and second tier cities. Adidas is not successful worldwide but one of his important metrics is the speed of the market share increasements in China. In this country including Hong kong, Macau, and Taiwan, the german sportswear group has outperformed Nike, with an improvement of 8.5% to 13.8% of the market (from Euromonitor) compared to 11.2% to 14.3% for his main competitor Nike.
But Adidas can take heart in one important metric: the speed of its market share growth in the Greater China region (which includes Hong Kong, Macau, and Taiwan). There, at least, Adidas has outperformed Nike—and significantly closed the gap. From the beginning of 2011 to the start of 2015, Adidas improved from 8.5% to 13.8% of market share, compared to 11.2% to 14.3% for Nike, according to Euromonitor. Those figures are mainly due because China’s has one of the biggest sportswear’s industries in the world.
Production of Adidas in China
More than 50% of Adidas’ products are manufactured in China. Although Adidas has been transferring some production capacity to countries like Vietnam due to rising labor costs, China still is a major production base for the company, according to a recently conducted market research study in China.
Market Position of Adidas in China
Adidas continued its position of success by ranking amongst the best-selling sportswear brands in China in 2011, largely due to its strong performance in footwear. Also, Adidas remained high competition in top-tier cities like Shanghai and Beijing.
Adopted Strategies of Adidas in China
- Product and pricing strategy: Instead of competing with low prices alone, Adidas sought to expand into lower tier segments by enhancing both products and pricing.
- Multi-brand strategy: Adidas used different sub-brands to improve different aspects of the brand. For instance, the company’s “Originals” line strove to increase retail value sales share to enhance awareness of the brand. While Adidas NEO targeted teenagers of 14-19, priced about half lower than Adidas Originals, and helps the company penetrate into lower tier cities.
- Sponsorship strategy: Adidas increased its brand awareness by sponsoring certain sports events and activities.
- Innovation Product Strategy: Adidas actively released new products to attract consumer attention. For example, NEO Label released in 2011 targeted at younger customers by combing sports and fashion elements.
- Internet Strategy: Adidas entered the Chinese e-commerce market in 2010 by launching the online store, tmall.com. Adidas sought to reach consumers of lower tier cities and further develop its distribution network.
Future Goals and Directions of Adidas in China
- Adidas will focus on regions of West China, which has a huge potential for further development within coming years. Adidas has set up its west China headquarter in Chengdu.
- The company plans to concentrate more on the market of lower tier cities in China. Its target number of new stores in China, mostly in third and fourth tier cities, is 2,500 by 2014 from 2011.
- Adidas will try to cover more than 1,400 cities in China by 2015.
- The company’s target annual growth of 15%-20% in China in the coming years (according to a market research in China).
Today developers, designers, and managers are part of its creation center based in Shanghai, with constant new product concepts especially made for the Chinese consumers. For the group, it is a success that will be continued. Indeed, the group expects China to contribute to 50% to their global sales growth. They will then extend their sales from lower tier cities since they are more and more attracted to sportswear not only for fitness but for daily casual wear.
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Daxue consulting China