Adidas will attack China in 2020

adidaschinamarch2013

Four years from now and China will have more than 3,000 Adidas store as a future plan from the German sportswear giant is expanding to 12,000 stores in China from its current 9,000 and aspires to more than double the cities where it sells its running gear and tennis shoes to 2,200-plus, said Adidas China head Colin Currie in a news briefing Friday.

Mr. Currie said that Adidas is catering to China’s economic upsides, such as new government policies to foster the soccer industry and population growth.
The company will zero in on China’s smallest cities, expecting continued urbanization even in the face of economic challenges, Mr. Currie said.

“We are cautiously optimistic, but we’re far more on the optimistic side, ” Mr. Currie said. Adidas executives plan to keep a close eye on the company’s sales data to track any fallout across China, now its fastest-growing global market, he said.

Adidas has continued to grow in China even as sales fall away for some foreign food-and-beverage companies, such as Yum Brands Inc., owner of the Pizza Hut and KFC franchises, and chocolate maker Hershey Co.

Adidas reported Thursday that its sales last year in the China region, including Hong Kong and Taiwan, increased 18% excluding foreign-exchange effects. In the fourth quarter, sales were up 16% excluding such effects. Much of the company’s growth has come from aggressive expansion across China.

China is a key growth market for sportswear makers, as more middle-class Chinese hit the gym, take up sports or travel for outdoor adventures.

The sportswear market in China, including everything from swimsuits to soccer shorts, grew to 165 billion yuan, or $25.3 billion, last year, up 11% from a year earlier, according to market research firm Euromonitor International.

As part of diversifying the economy, China’s leaders are also championing the development of sports, building up athletic events as well as arenas and television stations to support them.

A big priority is soccer. Chinese president Xi Jinping, a huge soccer fan, has said his dream is that China will qualify for, host and win a future World Cup. Chinese companies have invested in overseas soccer teams and Chinese teams have paid large transfer fees to bring in star players from Europe. Conglomerate Dalian Wanda Group bought a 20% stake in Spanish soccer club Atlético Madrid last year.

Adidas is attempting to piggyback on a government mandate making soccer compulsory in schools. Last year, it signed a three-year deal to create soccer programs in 20,000 elementary and middle schools across China, training 50,000 teachers and running a national summer camp.

Adidas is hoping to repeat in soccer the success that Nike has had in building up basketball in China, now one of the country’s most popular sports. Nike is now the No. 1 sports brand in China by market share, leading with 17.5% share of sales, while Adidas is right behind with 16%, according to Euromonitor International.

Mr. Currie said he believes that China’s soccer agenda will boost the participation rate and benefit the company. Many Chinese still wear Adidas as “athleisure” wear, but the demand for athletics gear is likely to grow over the next five to 10 years, he said, adding, “I think we’re at the crossroads of a cultural change.”

To be sure, many sportswear companies expected a sporting boom in 2008, when China hosted the Summer Olympic Games in Beijing. Yet companies, including Adidas, overestimated the demand and suffered from a glut of inventory for years as a result.

Mr. Currie said the trends are different now as more people participate in sports and as women and girls have become a key segment of the athletic market.

The company plans to open stores that focus on individual sports and population groups, selling soccer gear and more apparel to children. Mr. Currie also sees a boost from the end of China’s one-child policy, which he expected to result in more children playing sports.

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