Beijing, October 1981: A group of 86 runners from 12 countries have entered in the first-ever Beijing Marathon. Starting from Tiananmen Square, the runners pass Xidan and Wukesong districts before returning to Tiananmen Square after 42.195 km. People walking the streets of Beijing probably wonder what these runners are up to – and why anybody would run through the city in the first place.
For three decades, China has been a poster child for growth, lifting well over half a billion people out of poverty, transforming the nation’s image and confidence, and putting it on course to be the world’s largest economy by 2020. Much of that growth has been based on manufacturing goods for export to the rest of the world, but the Chinese government is now working to restructure China’s economic mix, placing more emphasis on domestic consumption.
This is good news for consumer goods companies such as the adidas Group – not only the fact that consumers are spending more, but because they are more experimental and individualistic in terms of what they want to do and what they want to wear. What’s more, their participation in sport is increasing.
BECOMING THE TOP INTERNATIONAL SPORTSWEAR BRAND IN CHINA
Beijing Marathon 2013: International top athletes are participating in the highly competitive race which has become an IAAF Gold Label Road Race. For the fourth consecutive year, the adidas brand is the Official Sponsor of the most high-profile running event in China. And alongside runners from all parts of China and the world, around 200 adidas Group employees are competing as well, proudly demonstrating their passion for sports on the streets of Beijing.
The adidas Group is determined to be a desired part of China’s evolving sense of identity and, having been ranked as one of the most powerful foreign brands in China in a recent survey carried out for the BBC, is uniquely placed to do so. The BBC outlines some of the many reasons adidas has triumphed. Most important, it says, is that the company understands the quickly changing Chinese market. It also cites the company’s progressive “city strategy”, which looks beyond coastal cities to rapid growth and new consumers in cities across the country, particularly inland.
ROUTE 2015 – FOCUS ON LOWER-TIER CITIES
When the adidas Group kicked off its strategic business plan Route 2015 in China back in 2010, a special focus was put on growth in lower-tier cities to address this trend.
Our Route 2015 strategy was based on five growth modules. Each was a major strategic thrust in its own right.Colin continues: ”Our category attack in the high-tier cities saw us refine our offer, our presence and our positioning in key market segments. For the lower-tier cities, we knew it was about presence – rapid physical expansion to put ourselves within consumers’ reach. But we knew equally, that this expansion had to be meticulously planned, with product and pricing to match the fast-shifting consumer tastes we are seeing.”
So far, this clear strategy has worked out well: The adidas Group’s 2012 results showed a 15% sales increase for Greater China. In the first nine months of 2013, the adidas Group reported a 7% increase in Greater China. As importantly, adidas has gained market share and is growing faster than its rivals, including both international and domestic brands. Today, adidas is Greater China’s most profitable sportswear brand for its franchise partners.
In the 1990s, first franchise partners opened adidas stores in China. Today, adidas operates more than 7,600 stores in China, a big portion of them in lower-tier cities. The mix of higher living standards in these areas and falling trust in local brands means that people are increasingly looking to buy aspirational foreign brands. adidas is positioned as a premium international brand and it is getting stronger and more desirable. By 2015, adidas aims to increase its mainland coverage from 550 cities at the end of 2010 to 1,400, with plans to open an additional 2,500 stores nationwide between 2011 and 2015.
THE GREAT OUTDOORS
The Beijing Marathon is just one of many success stories in running: Across the entire country, marathons and fun runs have experienced tremendous growth over the last few years. In 2012, some 500,000 people participated in 33 marathons and fun runs – a 50% increase from 2011, which saw 22 races take place across the country. When compared with 2010, a year in which just 12 marathons were held, it becomes abundantly clear how quickly this trend is taking off. In fact, the Chinese Athletics Association (CAA) predicts that by 2015, China will play host to 50 annual marathons.
"China has the Running Bug"
China has the running bug. Running has become extremely popular in China over the last five years. Although much of this can be attributed to the popularity of running in the West, the recent launch of China’s national fitness programme is clearly fuelling interest in this inexpensive and accessible way to exercise.
EXTENDING ROUTE 2015
“We are operating in the world’s most dynamic marketplace and we see tremendous growth opportunity,” says Colin. “But we cannot rely simply on riding the wave of China’s growth. Our challenge is market leadership and, as our rising market share testifies, we are winning. Beijing and Shanghai will always be important for us, but we expect two-thirds of our growth to be from consumers in the lower-tier cities as they become attracted to sportswear – not just for fitness, but for easy casual wear. There are differences in China. We needed to understand those differences and tailor our products to meet them. This is how we will unleash pent-up demand.”
Colin is certain that the company has the right strategy to build the brand commercially through a dual focus on brand equity and sell-through.
The future includes a more rigorous continuation of our franchise model focused on retail operations excellence and includes continued expansion in lower-tier cities. We will also re-ignite Sport Performance with product and brand communications tailored specifically for China, which will capture growth.And as China’s market matures, consumer demand will change and impact the way adidas brings products to market. As Colin says, “We are already part of a major shift – from ‘Made in China’ to ‘Designed in China’. We recognise that the Chinese consumer is different; that’s why we localise a lot of our product lines in our Creation Centre in Shanghai. This is a major change and we are helping to pioneer the trend.”
For many consumer goods companies, winning in China is the basis for winning globally in the future. The adidas Group is no exception and is setting itself up for future success in this dynamic market: Already today, designers, developers and product managers are part of adidas' Creation Center in Shanghai, constantly coming up with product concepts specifically for the Chinese market and its neighbouring countries. For the adidas Group China is a sporty success story that will be continued.
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