Adidas v Nike – Different Strokes

Having spent the last few months “on the road” I have found myself in many retailers discussing the trade in general and, in particular, the changing fortunes of “the big two” – Nike and adidas.

Whilst Nike were recently reporting revenues up 15% to $7.4 billion, adidas Chief Executive Herbert Hanier was admitting “We had to accept in late 2014 that we’d not met all our financial ambitions which we’d set ourselves in the light of the strategic business plan Route 2015 five years ago”

Similarly as adidas roll into a 10 year £750M deal with Man United, Nike, who had been given a period of exclusivity to negotiate an extension with United and also retained the right to match any other offer, decided not to exercise either option, claiming the terms “did not represent good value for Nike’s shareholders”.

Are these isolated examples or are they part of a broader change in the way that the two brands are approaching the markets?

For years the development and marketing strategies appeared to share some common ground for both companies, however it does seem that we are starting to see a noticeable strategic shift in terms of marketing and business development strategy.

Getting closer to the market
One of the areas where the approach is certainly changing is within the manufacturing processes – driven not least by a desire to get new products to market quicker and to be closer (on all levels) to the market.

Adidas is to move the manufacturing of some goods from Asia back into Europe alongside investing in talent and marketing in Los Angeles, New York, London, Paris, Shanghai and Tokyo

Whilst the “act global, think local” drum has been banged by many a business historically, Roland Auschel from adidas underlines this approach commenting “Global brands are created in global cities. If we win running in New York and Los Angeles, we will win running in the US.”

The brand is also testing automated production units that would speed up manufacturing and allow customers to personalise their purchases.
The latter element of this strategy is certainly gaining momentum across the UK retail trade and High Street brands such as Zara are undoubtedly benefitting from increased production speed.

More is doing less
From a ranging point of view the adidas approach to 2020 is “More by doing less” and aims to carve out efficiencies from a stretched product range that was eating into margins due to surplus stock and muddled lineup.

As Eric Liedtke, head of global brands at Adidas, explains: “The place we wanted to cut down on is models. If we do a hoody and it’s black that’s one product. If we do it in 30 colours then that’s 30 SKUs but it’s still one model. That’s what a consumer wants, they want to see variation of a single model. That cuts [things] down from a workload perspective so that we can make more efficiencies as a brand because it’s just one hoody in a factory with different dyes.”

Adidas also plans to make the cuts to its product line by 2016 and will repeat over and over until it gets the right balance to be competitive with things that drive the market.

Future plans cost money
Nike, on the other hand, continues to invest with their spending plans higher than ever.

Its push to drive higher retail revenues through bricks-and-mortar stores has resulted in higher expenditures. The hi-tech premium image that the company puts across also means a higher investment on store rollouts.
The digital experience and e-commerce – The company spends considerably on enhancing the digital experience for customers and increasing e-commerce sales.
Research on innovative manufacturing technologies– This would ultimately result in lowering the cost of production, but requires on-going investment.
Capex expenditure is set to rise from just above 2% to approaching 4%.

So where does this leave us?

Five years ago Adidas presented an ambitious Route 2015 which targeted sales of €17bn by the end of 2015. While it ultimately failed to hit the target, it gave the brand a footing in emerging markets and increased revenues by more than 40 per cent since 2010.

However did they lose the consumer connection along the way?

Nike, have seen market share and revenues rise during that same period.

Are we at a crossroads in the evolution of our two most powerful brands where, whilst still some common ground, their areas of focus are moving in different directions.

What is clear is that how the consumer connects with these brands in the future will change – whether a forced change through technology, or a change through strategy – and with the industry moving faster than ever its difficult to predict who will benefit most.

The digital touch points will be critical but most importantly the consumer must be at the heart of everything that the brands do.

Consumers want to shape their preferred brands in a way that they have never been able to before and the brand that empowers us to do so, whilst maintaining their clear development objectives, will be the brand that ultimately succeeds.

Upselling sporting goods

I don’t know why, but in recent weeks I seem to be having more and more conversations with sports retailers about “checkout candy”.

Maybe its because many are online and understand the concept but for those of you that don’t, let me explain.

Put simply the phrase refers to “temptation at the checkout”. You know the sort – sweets around the till. In fact in the grocery industry there has been considerably pressure for retailers to withdraw from this strategy as it is too successful!- apparently consumers are simply unable to walk by a row of sweets without purchasing them thus affecting their health!

In simple terms checkout candy is recognising the ability to upsell which, according to Dr Jon M. Hawes, director of Akron University’d Fisher Institute for Professional Selling “spells the difference between ‘just getting by’ and having a very profitable year,” “Revenues from upselling are usually over and above a store’s break-even point, so the extra sales quickly turn into profits.” Retailers commonly enjoy sales increases of 20 percent or more when they start upselling.

OK. But are there simple ways to implement this strategy in the sports trade?

Upsell accessories.
The surest upsell is to offer additional related items for something a customer is already purchasing.
If the customer is buying athletic shoes then you might like to suggest insoles. Why not place an insole in one shoe and not in the other so that when they try them on they can feel the difference.

This is a strategy that Footlocker employ incredibly successfully incentivising staff and ensuring that conversion rates remain high and that incremental business levels are maintained. You might also suggest things like shoe care products – a classic shoe shop upsell.

Consider the things you would want if you were the customer making this purchase – if you bought a camera, you would want to buy an extra battery, a case to carry it in, extra flash card and a card reader so you could get your pictures off to your computer, all the things necessary to create the best possible experience with the product.

In a wholesale setting, try and find out everything you can about the customer’s business and offer other related products. Appeal to most wholesalers desire to simplify and give them the option to get everything they need from one place–your place.

The accessories element of any retail business should be one of the most profitable areas.
Online retailers thrive on the “you may also like” or “customers viewing this also bought” prompts within their sites. If you are a bricks and mortar retailer use the same strategies.

Group your products
Group relevant product areas together – tennis rackets next to balls, bags, headbands and vibration dampeners rather than simply a wall of rackets.
Running shoes next to socks and insoles, hockey sticks next to grips and balls, goalkeeper gloves next to glove wash and glove bags – the list go on but all can lead to incremental sales.

Look for future events or to tie into local activities. For example many rugby retailers are driving steady business already from Rugby World Cup 2015 pin badges and keyrings and we are still some eight months out from the event.

As well as placing the products in relevant areas alongside upsell lines look at using the till space as effectively as possible.

In front of the customer works. Tucked away behind the till doesn’t.

But its not just about having additional products to upsell alongside the purchase. Don’t forget that the initial purchase itself is an opportunity to upsell.

Upsell features.
Not all products are equal, and especially in the sale of higher-end items, it’s good to guide the customer through different features, highlighting the benefits of more-expensive items.
Make it practical for the customer.

In a wholesale setting, you might consider different size orders that would give the customer the same product at a better deal. Bulk items generally come with a benefit, so it’s a good idea to highlight the long-term price benefit in making the bigger buy now instead of waiting to come back for more.

Upping the ante
Upselling isn’t just “extra” pounds in your till—it’s vital to the long-term profitability of your sports retail business and, perhaps more importantly, is the reason why the specialist sports retailer can continue to grow and thrive in the face of stiff multiple retail competition.
According to the experts, here’s why:

Customers may believe they are shopping for price, but they really want value. They will return only if what they buy meets their needs.

Customers feel suspicious of a pushy salesperson, but at the same time they need shopping guidance from a sales staffer who is focused on their needs.

With more stores advertising huge markdowns and discounts, you have to keep your margins up by upselling with better merchandise and cross-selling with desirable add-ons.

So next time you are looking through a trade magazine, or walking through a show, don’t forget to spend some time looking at the accessories and upsell lines.

Pick them wisely, and to complement your product offer by category, and you might just find that additional sales lift you’ve been looking for.