Adidas: Opportunities and Challenges Presented by Operating in a Digital and Physical World

Adidas is arguably one of the world’s most recognisable brands. Established in 1949, there have been many challenges and opportunities which the company has both faced and taken advantage of. Adidas has never shied away from innovation when it comes to their products, from using 3D printing technology to making products out of plastic bottles; however, they are far from being the frontrunner when it comes to e-commerce, a market on which they have placed increasing importance in recent years (growing by 76% in 2018) (Adidas, 2018). 

 

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Tradition vs. Modern

Traditionally, clothing and footwear products are bought by physically going to a store, choosing a product, trying it on, queuing, paying and leaving the store. Personal experience has taught me that this process can take anywhere from a few minutes up to a few hours. It can be the most frustrating feeling to make your way to a retailer, only to find that they do not stock what you want, consequently trekking all the way back home, empty handed. Thanks to the internet, however, this frustration and disappointment can be almost completely eliminated, saving time and energy. The direct and initial costs of online retail stores are much lower than those of physical shops. Online stores, for example, do not require the purchase or lease of buildings and land, or employees and sufficient inventory at each location. 

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The Perfect Balance?

Although there are clear disadvantages to the traditional sales process, there are also many benefits and services associated with it that add value. Adidas, for example, currently has 2,500 of its own retail stores, 13,000 mono branded franchise stores and 150,000 wholesale stores worldwide, making the product easily available to its customers (Adidas, 2018). Although the digital presence of a company is more essential than ever before, the popularity of physical locations should not be underestimated. A Mintel report (2018) stated that in-store purchasing of sportswear is still more popular than online purchasing among all age groups. One respondent even stated that they never buy footwear online, while another mentioned that even when they order sportswear online they choose the "collect in store option" to enable them to see and try on the product in store. The "collect in store" option is not yet offered by the Adidas online shop (adidas.co.uk) and should be considered, as consumers clearly value this service. There is quite a significant difference among some of the age groups, while only 30% of 55+ year old respondents purchased sportswear online in the past 12 months, around 57% of 16 to 34 year olds did, suggesting that although not yet the most popular method of purchasing sportswear, the popularity will increase, highlighting the importance of a good digital presence for Adidas in order to take advantage of future markets (Mintel, 2018). 

In 2018, a Financial Times article reported that in the coming years, Adidas aims to close down an unspecified number of physical stores, the current CEO, Kasper Rorsted, stated that "there will be fewer stores, but they will be better". He also mentioned that in the future, stores will concentrate on consumer experience rather than being revenue-driven as in the past. The company aims to increase its online sales to 4bn Euro by 2020 (from a current 1.6bn Euro) by hiring 200 staff with a digital focus (Storbeck, 2018). The concentration on experiential stores highlights the fact that Adidas understands the importance of a physical presence while accepting that due to the increase in online shopping, the need of these may become less financially viable in the future. 

Today's consumers do not just use desktops and laptops to make online purchases anymore, 40% of online transactions are made on mobile devices (Lacy, 2018). Although shopping via a mobile phone may not yet be the most popular purchasing method, it has increased over the last 6 years from 7% to 17% of all products (including clothing, electronics and books) (PWC, 2018), and is expected to grow further (Lacy, 2018). The online trend clearly highlights the importance of companies to have a strong digital presence. In response to this, many companies have launched Apps to make retail purchasing easier, Adidas having launched their app in 2017. The fully customisable App is easy to use and enables the customer to directly purchase all products (Adidas, 2018). The actual Adidas mobile website makes the user aware of the app, encouraging the customer to download it. Research has shown that while users of mobile shopping apps tend to purchase and interact more with the brand, they also tend to return products more frequently than in-store or website customers (Shankar & Narang, 2017). Although Adidas, has created an app, taking advantage of the growing mobile phone purchasing  trend, it was pretty late to the app game and there is still plenty room for improvement. Its main competitor, Nike, launched their initial app, Nike Run, back in 2010 and released a ground breaking retail app in 2018, through which customers can reserve products before going to a store, eliminating any chance of disappointment caused by unavailable items (Tanasoiu, 2018).  The app also enables customers to scan the bar code a product themselves while in store to check its size, availability and request to try it on. Nike has taken mobile retail shopping to the next level and even manages to combine and optimise in-store and online purchasing. Although the retail app also gives the customer the option of buying items through the app directly it offers its customers much more than the average retail app (video below; Nike, 2018). 

Having been around since 1949, Adidas has been exposed to many drastic changes in the retail environment. While there are still areas in which the company could improve, specifically the design of their app, they continue to be one of the world's leading sportswear brands, proving that they have dealt well with the challenges that came with the advance of the internet. Although not the first to do so, they have created an app to respond to the increased use of mobile phones in retail purchasing, and plan to close down physical shops due to their high costs, while also recognising the importance of having a physical presence by focusing on creating “fewer but better” future locations. The secret to success in today's world is having the perfect balance between a digital and physical presence. 

References: 

Adidas. (2018). 2017 Annual Report. Retrieved from https://www.adidas-group.com/media/filer_public/6a/69/6a690baa-8430-42c5-841d-d9222a150aff/annual_report_gb-2017_en_secured.pdf 

Lacy, L. (2018). Mobile Shopping Is on the Rise, But Remains Split Between the Mobile Web and Apps. Retrieved from https://www.adweek.com/digital/mobile-shopping-is-on-the-rise-but-remains-split-between-the-mobile-web-and-apps/

Mintel. (2018). Sport & Outdoor Fashion - UK - December 2018. Retrieved from http://academic.mintel.com/display/935392/ 

Nike. (2018, July 20). Nike - Nike App @ Retail [Video file]. Retrieved from https://www.youtube.com/watch?v=MNtgvEEf9zs 


PWC. (2018). From Mall to Mobile: Adjusting to New Customer Habits. Retrieved from https://www.pwc.com/gx/en/retail-consumer/assets/consumer-habits-global-consumer-insights-survey.pdf

Shankar, V. & Narang, U. (2017). More businesses are trying mobile apps to lure and keep customers. Retrieved from https://theconversation.com/more-businesses-are-trying-mobile-apps-to-lure-and-keep-consumers-88684

Storbeck, O. (2018). Adidas looks to score online as it drives harder into digital. Retrieved from https://www.ft.com/content/23d071ca-381c-11e8-8b98-2f31af407cc8

Tanasoiu, F. (2018). Mobile App Success Story: Nike+Run Club - App Samurai. Retrieved from https://appsamurai.com/mobile-app-success-story-nike-run-club/