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NEW YORK — Like that other famous number two, Adidas is trying harder.
The company is on track to increase profits by 5 to 10 percent, and a slightly higher increase is planned for 2003, with strong growth planned in the U.S. and Asia. Combined apparel and footwear sales for the Adidas and Salomon brands were $6.1 billion last year. Apparel sales contributed $2.2 billion to that figure.
Herbert Hainer, chairman and chief executive officer of Adidas-Salomon AG, highlighted the brand’s strategy to retain the second slot behind Nike in the competitive sporting goods industry.
Launch Adidas Colours, vibrant athletic-inspired sportswear.
Introduce its first apparel-focused brand advertising campaign in February.
Build Yohji Yamamoto’s line into a $350 million business by 2006.
Ross McMullin, president and ceo of Adidas America, was also on hand at Blue Fin in the W Hotel in Times Square last week to help spell out the company’s business plan. In July 2001, Hainer tapped McMullin, a former president of the Gillette Group, to lead the U.S. team, replacing Steve Wynne.
To get more acquainted with retailers’ and consumers’ perceptions of the brand, McMullin toured the country visiting stores and is using some of the information he gleaned from them. Encouraged that stores realize how unhealthy it is to have one player with dominance in the market, McMullin said they also had some gripes about Adidas — delivery problems, and marketing, product design and product quality in need of an upgrade. Another common complaint was the line’s lack of color and the brand’s dependence on three-stripe items in black or blue.
In response to that, Adidas has launched its Colours division, featuring sportswear in fashion colors such as lime green, pink and yellow, as reported. For now, it is offered exclusively at The Finish Line, but it will be rolled out in February to others stores, including Nordstrom, which has 40 Adidas concept shops. Yoga pants, tanks, camisoles, fitted tops and other less traditional athletic looks will be offered. A print and outdoor campaign plugging Colours, including a billboard near Madison Square Garden, will also be released at that time.
Women’s apparel is a bright spot for the brand, accounting for nearly 32 percent of its $450 million U.S. apparel business. This year will be the first time in three years that Adidas posts an increase in U.S. apparel sales, McMullin said. For the first time, the brand has “a big backlog” with apparel — 17 percent — compared with last year.
Hainer said the company has been focusing on women’s apparel for two years. Women’s apparel is offered under the brand’s three tiers: sport performance for technical looks, sport heritage for retro styles and sport style for more fashion-forward pieces. By 2005, Adidas aims to slice its 18-month production cycle — the athletic industry’s standard for 20 years — in half. Some apparel items and select footwear already meet that criteria, Hainer said.
“The women’s market is definitely more difficult, but not in the negative sense,” Hainer said. “Women want apparel that fits their body shape and looks good, even if they don’t do sports. They are more focused on details.”
Instead of focusing on items, as was the case when Adidas saw a surge in sales in the late Nineties, there is more of a focus on apparel as a collection. In its heyday, Adidas sold 1.7 million snap pants one year and three items generated 40 percent of the apparel business, Hainer said. One of the obstacles Nike has faced in its attempt to be more fashion-forward is its reliance on items, he said. Puma, on the other hand, has made inroads with fashionable apparel, but risks relinquishing its athletic authenticity by being too geared for hipsters, observers have noted.
Adidas’ decision to team with Yamamoto has helped the cause. More than anything, the Y3 collection is designed to create a buzz around the brand and to carry home its three-stripe trademark. Next year, the collection will only be offered in 25 doors in the U.S. and 150 worldwide. Distribution in the U.S. will expand to 100 to 150 doors in 2004, but will not exceed 250 down the road, McMullin said.
“The whole thing is to create demand that is greater distribution,” he said.
The label is expected to be profitable in its second year, Hainer said. Noting that Y3’s $300 million to $400 million is a realistic sales goal for 2006, Hainer said the company does not want the collection’s sales to comprise more than 5 percent of the brand’s total volume.
The designer approached Adidas three years ago because he wanted to appeal more to younger shoppers, said Hainer, calling the alliance “quite successful” and generating “quite a lot of exposure.”
“In all fairness, it was a really clever deal,” Hainer said. “First of all, he is one of the best designers in the world, and is known to be cool and hip. And we got p.r. for free like hell,” referring to the many newspapers and magazines that picked up the story.
While Yamamoto has the authority to use the three stripes, those who don’t will face legal consequences. Adidas has filed lawsuits against eight retailers for infringing on the stripe.
“We aggressively defend our trademark in footwear and apparel,” McMullin said. “First and foremost, we negotiate with retailers to encourage them not to have garments with two or four stripes.”
The real risk is that consumers will be deceived and will buy inferior products, thinking they are Adidas, he added. Despite the brand’s no-nonsense approach to knockoffs, McMullin said, “This isn’t Adidas being cocky saying, ‘We own stripes.’”