Catalyst

Adidas seeks to create the New

Vinay Kamath | Updated on January 09, 2018 Published on August 24, 2017

Dave Thomas, Managing Director, Adidas Group India. - Bijoy Ghosh

The sports apparel and accessories major says better business lies in opening bigger and bolder stores

Dave Thomas looks every inch the rugby player he is. Tall and burly, Thomas, 46, the Australian Managing Director of Adidas India, likes to wear his brand not just on his sleeve but on his whole self. In an Adidas Originals branded t-shirt and sports shoes, Thomas could well be on the way to a rugby match, though he‘s on a market visit to his stores in Chennai.

At the spanking new Adidas outlet at the Express Avenue mall in Chennai, Thomas waves expansively around the store, all 7,100 sq ft of it, the largest so far in the country, explaining that this large format is the way its new stores are all going to look. “We are opening bigger stores and making them more experiential in a new format. We have a lot of small stores, but the ability to experience the brand is limited,” he explains.

Doing business differently

Apart from a large range of its products, the store has three zones: a small football pitch, a treadmill zone to try out the football and running shoes and a jersey zone to personalise T-shirts. To roll out more such stores, Adidas is consolidating its franchisees. There will be fewer and better franchisees. In the past, Adidas had almost 500 franchises. That came down to 75 and now it will bring them down to 45. “In the past, the strategy of franchise partners was, smaller the store greater the chance of being profitable. But we have seen over the years that the bigger stores are the ones which make more money. Consumers are sick of stores with a limited range,” he explains, adding, “We are confident of opening stores above 10,000 sq ft, provided there is a compelling business value.” Devangshu Dutta, Founder of retail consultancy Third Eyesight, says a large store will serve Adidas’ strategy well. “Consumers can experience the brand in its wholeness but it will also need better trained sales associates who can showcase the brand better. Consumers read a lot, there is more awareness of a product before they land up in a store so sales staff need to be prepared.”

Powered by the resurgence in running and in football, Adidas India, along with brand Reebok, registered ₹1,400 crore in sales. Among the international footwear brands, which include Nike and Puma, Adidas and Reebok together claim a 45 per cent share. Adidas has been registering a 12-15 per cent growth in the approximately ₹3,500 crore-a-year market for premium sports footwear. “We’ve done a lot of the right things, the strength of the brand has worked, we have seen huge progress in all parts of the world; in Asia too, we had the same strategy, how do we create the New. We believe that resonates with the youth,” Thomas elaborates.

Adidas today has 450 stores, Reebok 220. More stores will depend on rent and profitability of franchisees. Adidas has got the government’s go-ahead to set up its own stores and will open its first owned store at Ghaziabad, then a large one at Connaught Place in Delhi and an Originals store in the NCR region.

Thomas says the focus has been on a few basic things: focus on key cities, bringing a product to market much faster, and rolling out large stores to showcase the whole range. “When I joined, there was at least a 2-3-month lag between products launched globally and their launch in India. The consumers are very savvy they know when a product is launched in Washington or London, so why should it be different in Chennai? Now most products have a good hit rate as we’re launching at the same time,” asserts Thomas. He points to the success of the predominantly white Originals range. “The key influencers, like the Bollywood community or actors or singers using Originals, have helped it click. Originals is now 10 per cent of our business in India. It may be inspired by sport but they are more of lifestyle shoes.” Stan Smith, its blockbuster Originals, was a tennis shoe, but is now a lifestyle statement.

Running strong

There is a tablet in the store for consumers to purchase online what they can’t find in the store. “We are tying together the online and offline pieces and it’s been fairly successful for us,” he adds. While running and football are the biggest piece of action for Adidas, Thomas recognises that other sports such as badminton are taking off and, of course, that India is a cricket-mad country as well. The brand expects growth in other sports footwear too.

While recreational running is growing stronger in India the running shoe is getting more important. The influx of specialist running shoe brands could crimp a multi-sport footwear brand such as Adidas. “Brooks, New Balance, Saucony and Asics are quite strong brands in this segment. Runners expect the right kind of fitment and suggestion to suit their running gait which is addressed better in running speciality retail outlets,” says K Sriram, co-founder of Running Lab, a running speciality store, which stocks everything from apparel and nutrition to recovery products.

Ask Thomas if India has emerged as one of the top markets, and he grins broadly. “For years, India promised a lot and never delivered, but now that it is delivering, people are interested. We have seen progressive improvement in sales, brand and profits. We are in the top 20 markets; among emerging markets, we are starting to get bigger though we are still not among the more profitable markets,” Thomas explains.

Dutta of Third Eyesight says the timing is right too. “There are more people involved in an active lifestyle which is linked also to rising incomes. Consumers are tending to buy shoes for specific activities.”

Thomas says with the growing trend of people wearing athletic shoes at both at work and leisure, it’s a happy place to be in. “I used to work in P&G and we used to have casual Fridays which means you could take your tie off! But now things have changed. Take the Ultra Boost, a premium shoe, the best running shoe we have ever made, it can be worn with a pair of jeans or to work. Not everyone will run a marathon, but they are buying it too. That leisure lifestyle trend is helping us a lot.” Adidas is a brand that offers shoes for varied sports, will it even offer shoes for kabaddi? To that, Thomas says, “Now, that’s one sport I won’t mind playing!” Given his rugby-size build, at 6.1” and 105 kg, he would fare well.

Published on August 24, 2017

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