The Hindu Business Line : `Future growth from exclusive stores'

Andreas Gellner, Managing Director, adidas India Marketing, was in Chennai recently to open adidas' Sports Performance Centre (SPC), said to be adidas' second largest in Asia, with an area of 5,700 sq. ft. Lest the name confuse you, SPC is what adidas is calling its large-format stores that the press release describes as breaking away from traditional retail formats and following a design inspired by sports and performance. adidas opened a 9,000 sq. ft store in Bangalore in May. BrandLine caught up with Gellner to find out, among other things, where India figures in the sports major's business. Excerpts from the interview:

Why are you calling this store an SPC?

This is the name for the concept globally. It's specially designed to be a sports environment centre where athletes can find everything they are looking for.

The SPCs are an important communication platform - we can showcase the breadth and depth of our brand offering. We make products for more sports than any other brand and this store demonstrates that.

What are the plans for the SPC?

We plan to set up these stores in the Tier 1 and 2 cities as soon as possible - that would include Delhi, Mumbai, Hyderabad and Kolkata. It takes a lot of preparation, though - 6-8 months to sign the contract and two months for the interiors. The investment is around Rs 2 crore. Even some existing stores are being renovated to look like SPCs, though they are much smaller in size.

How is India doing as a market for adidas?

Last year, we were 11th or 12th among adidas' global business. This year, we are No 6. We expect to be in fourth place by the end of next year.

You've said that India is one of the most promising markets.

Yes, it is, apart from other hot spots such as China, the former USSR, especially Russia. India's promising because of the potential size of the market and its propensity to spend. Many households in India have money, old money, only, it wasn't spent on products like these. Now, with economic growth, there's money from new employment and the old money is being spent on such stuff.

How easy or difficult is it to sell premium goods here in India?

In China, in the last eight years, the consumer has been very, very eager to be part of a Western lifestyle and so is willing to pay a premium for such brands. In India, I don't think this is the case. It is important that the brand is credible - our brand's credibility is a door-opener but once they (consumers) are in, they want very rational justification for the prices. So it's slightly more challenging.

But people are spending more? On premium products?

Oh, yes. Our premium segment is growing very fast. It's very strong in India. And many here buy adidas to make a statement.

What are your retail plans?

Future growth will be from mono-branded environments (exclusive stores). We're growing geographically also, going into Tier 4 and 5 cities, places such as Coimbatore and Meerut which hadn't been on the radar earlier but which we realise have a lot of purchasing power and knowledge about the products. We have 150 exclusive stores now, we plan to raise that to 220 by the year-end. All stores will follow the same renovation concept.

adidas is available in multi-branded outlets too, but there, consumers look for products at smaller price points; in exclusive stores, costlier stuff tends to get sold. Some of the range here in the SPC is exclusive to this store.

How are your sales split between footwear and apparel? Do you have to localise for the Indian market?

Oh, 50-50. adidas apparel is very strong in India. We are also exporting to Europe, the US and other Asian markets, this is a very positive development. We outsource from suppliers.

As for localising, when we came in 10 years ago, we didn't localise and struggled to achieve market size. Now the market is mature, we don't have to do that.

What do you think of the Government allowing 51 per cent FDI (foreign direct investment) in single-brand retail?

Well, complete control is 100 per cent (laughs), this is only 51 per cent. Even that, adidas invests very selectively. The franchise model works for us. If you see the amount of applications filed for that 51 per cent ... it's very low, it would change if 100 per cent is possible.

What are the spin-offs from the association with World Cup football?

It's very dominant in the public mind and we hope it has a sustainable impact. It's too early to judge ... actually, football and World Cup are already associated with adidas.

What about its association with cricket?

You can't be in India without a role in cricket. We are fortunate to have the most important player on our side (Sachin Tendulkar). We have Team Australia, and so we're well-positioned. Team India sponsorship is not available to us for the next few years (Nike bagged it) so we have to see how we can increase our association.

By ambush marketing?

(Laughs) All this is very legitimate, it just has to be within the legal framework, and ultimately, the consumer is the judge.

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