Why Can’t Adidas Make Explosive Models?

Is Yeezy without Kanye still Yeezy?

I am afraid this question will linger in people’s minds for a long time.

On October 25, Adidas announced the termination of all cooperative relations with the rapper Kanye West due to the Jewish racial hatred of the rapper Kanye West. At the same time, it will stop the production of Yeezy brand products and stop the Adidas Yeezy business.

It is expected that the termination of the Yeezy business will bring a revenue loss of $250 million (about 1.8 billion yuan) to Adidas in the important fourth quarter of the 2022 fiscal year.

Some insiders said this move was the “lifeblood” of Adidas. The reason for this is on the one hand because Yeezy’s sales are good. The Yeezy sneakers, priced between 200 and 700 euros, have brought Adidas about 1.5 billion euros in annual sales in the past year, accounting for more than 7 percent of the company’s total revenue, according to estimates by consultancy Telsey.

On the other hand, except for Yeezy shoes, Adidas has really not had any phenomenal explosions in recent years.

If there are no explosions, revenue will also be affected. Data show that from fiscal 2017 to fiscal year 2021, Adidas’ revenue increased slightly from 21.22 billion euros to 21.23 billion euros, almost stagnating. In comparison, Nike’s compound annual growth rate of 6.4% is better than that of Adidas. In terms of market share, in 2022, Adidas’ “second position” in the world and China will be seized by lululemon and Anta.

From Superstar, Stan Smith, to NMD, Yeezy Boost, why does Adidas, the once “explosive model maker”, no longer produce explosive models?

“Explosive Maker”

No brand can survive without the environment, and Adidas used to be a model for capturing the industry’s “climate change”.

In 2014, the retro style was back in trend, and frigidity and the street were the two major elements of the retro style at that time. Born in 1963, the classic tennis shoe Stan Smith became the explosion of the year.

The reason why it can become an explosion is because the design of Stan Smith is really classic. The pure white shoe body is matched with a colorful tail logo, which is distinctive and simple, and can be casual or street. Especially the green tail, the unique color matching has formed a frenzy in the shoe circle. For the post-90s who don’t mix shoes, even if they don’t know the history of Adidas, they feel the freshness of color matching for the first time.

In addition to the product itself, the operation of Adidas has also resulted in the birth of explosive models.

According to information, Adidas first stopped the production of Stan Smith in 2010, emptied the market, and created scarcity; three years later, they found the originator of frigidity and Céline’s creative director, Phoebe Philo, who wore these little white shoes on the big show. The curtain call, lock the trend positioning. Since then, “Beisao gave up high heels and put on white shoes” attracted the attention of the entire fashion circle. For a time, small white shoes became the standard of ins bloggers, domestic stars and street fashionistas.

Data shows that in 2015, Stan Smith’s sales exceeded 8 million pairs, becoming the main driving force for Adidas’ performance growth.

In 2016, the sports and leisure style is on the rise, and formal/casual shoes have become popular. Another explosion of Adidas – NMD was born.

This shoe is made of full-length boost sole + primeknit hot-melt knitted fabric, black surface, white bottom, and red and blue color matching. Both the sense of technology and design are impressive, subverting people’s understanding of running shoes. It is also this shoe that made the boost technology, which was born in 2013, famous and became the housekeeping technology that Adidas has used to this day.

Later, these shoes began to appear on the feet of various stars. Edison Chen and Eason Chan are both fans of NMD. Data shows that on March 17, 2016, NMD sold 400,000 pairs in one day.

The emergence of explosive models has led to the growth of performance. Data shows that in fiscal 2016, adidas Group’s footwear sales soared by 53% year-on-year, with output reaching 360 million pairs. NMD’s sub-brands Originals, NEO and Y3 and other sports and leisure footwear increased by 45%, which is twice that of functional sports products. as much.

Adidas, who has tasted the sweetness of fashion, is getting more and more fun on the fashion road. Almost at the same time as NMD, in 2015, Adidas launched the Yeezy series of shoes in cooperation with the trendy brand Yeezy of the American rapper Kanye West. The difference from the first two is that this series is a niche high-end line.

The silly soles and the design of overly wrapping feet are actually not in line with the public’s aesthetics, but it is this kind of “alternative” that makes this shoe an endorsement of “fashionable people”.

In February 2015, Adidas’ first “Yeezy boost 350” and “Yeezy boost 750 series” were officially released.

The data shows that only 9,000 pairs of Yeezy 750 were released in the world, and the price was once fired to tens of thousands of yuan; and the price of Yeezy 350, which was sold for less than 2,000 yuan, also tripled, “but few people who grabbed it were willing to sell it. Go, I would rather collect it myself.” Some netizens recalled.

For Yeezy’s “fashion sense”, ordinary people may not be able to understand it, but everyone has a reputation for the “feeling on shit” foot sense. “Yeezy’s comfort is very good, especially in summer when wearing bare feet,” said netizens who wore the shoes.

With its niche high-end positioning and the superiority of the product itself, Yeezy has become the “cash cow” of Adidas. Data shows that in 2019, the annual sales of Yeezy series has exceeded 1 billion US dollars, and it will reach 1.7 billion US dollars in 2021. Adidas also stated that “the cooperation between the two parties is one of the most successful in the history of the industry”.

“Fashion is also fashionable when it is successful”

There is a saying in the fashion circle – “There is no constant explosion”, which has also been verified in Adidas.

With the launch of Triple S shoes by the top fashion brand Balenciaga in 2017, the trend of fashion has blown from sports and leisure to luxury sports. Since then, for a long time, Balenciaga’s old shoes have become the endorsement of trendy shoes.

In 2020, Dior and Air Jordan 1 launched a joint sneaker. The combination of Dior’s classic prints and AJ1 is refreshing and has been fired for nearly 100,000 yuan in the shoe market. At this time, people’s pursuit of trendy shoes has gone one step further – with luxury endorsements.

In fact, Adidas has also successively launched joint series with luxury brands such as Prada and Gucci. For example, in cooperation with Prada, the design was too simple and was criticized by netizens. And the cooperation with Gucci, the style is too loyal to the hard core of Adidas, failed to make Gucci fans heart.

So many people lamented that since 2016, Adidas seems to have no more explosive models like Yeezy. Even Yeezy, young people have “aesthetic fatigue”.

Yeezy is pretty good, but the once-popular Stan Smith and NMD are even worse. Some netizens in the Hupu community have long said, “Stan Smith is already on the street. The most embarrassing one was in a subway car, including 4 people wearing it.”

More annoying than the bad street is the proliferation of fakes.

It is inevitable for popular models to be plagiarized, because their functionality is not strong, so the threshold for plagiarism is very low. The best way to deal with plagiarism is to keep iterating and innovating, but from the perspective of Adidas’ popular products, it is not obvious.

Adidas is “fashionable and fashionable”. The fundamental reason for its poor performance in recent years is related to its positioning. Fashionable things themselves have certain fashion trends, but it is actually difficult to follow fashion trends, because the selection of things that conform to fashion trends is too wide. More effort in fashion will also bring about a diminishing value in the sports market. Judging from the trend in recent years, if the function of sports and fashion are combined, it is more likely to produce explosive models.

In the running circle, as the sole technology is recognized by the professional circles, ASICS, Hoka, and Onang have set off the popularity of niche running shoes. In the yoga circle, lululemon has opened up the market with soft, waxy and skin-friendly nulu fabrics to suit women’s feet. The type of running shoes has developed rapidly; in the outdoor circle, Archaeopteryx has countless fans because of its high performance.

But in these professional sports fields that have been on fire in recent years, Adidas seems to be a bit “left behind”.

Data shows that since 2017, Adidas R&D has continued to decline, and Adidas R&D revenue in 2021 will account for only 0.6%. In contrast, Anta’s R&D expenses will account for about 2.3% of its revenue in 2021.

The most direct impact of low R&D investment is the inability to produce popular models with a good reputation.

For example, the new midsole technology 4D launched by Adidas in recent years has been criticized as “feet not as good as boost” and “can’t handle it when entering the sand”; while lightstrike materials have been criticized for “attenuation after the foot is on” (mainly refers to the rebound and structure sex). For ordinary consumers, the biggest problem with the two is that they do not have the same attractive appearance as boost, which is generally attractive.

Times have changed. In the sports market where products are more subdivided, whether it is an international brand or a popular brand, it is impossible to rely on one product to take all. The problem with Adidas is that it is large and comprehensive, and it has not worked hard in several categories. Consumers value not only the brand premium, but also the product itself. No matter how strong the brand is, without the support of products, the brand will gradually degenerate.

Rebranding is a priority

Behind the explosion of models is the decline of brand power.

The brand power here is not only reflected in the product itself, but also in brand marketing and supply chain.

Adidas global media director Simon Peel once admitted in an interview that the group has over-invested in digital marketing channels to the point of sacrificing brand building: “77% of the company’s marketing spending budget is in performance advertising, and only 23% is invested in brand advertising. superior.”

“Promotion” is the most intuitive impression that Adidas has given in recent years, and one of the manifestations is crazy discounts.

Behind the discount, there is a backlog of inventory. Adidas’ second-quarter financial report for 2022 showed that the company’s inventory increased by 35% to 5.483 billion euros.

Some industry analysts believe that one of the reasons for the inventory problem is that Adidas’ traditional channel model is more affected by the epidemic.

Under the epidemic situation, a faster response capability and a more accurate judgment of the market are required. Compared with the direct sales model, over-reliance on dealers may lead to insufficient flexibility and untimely market response. Especially under the epidemic situation, during the economic downturn, when consumption is more cautious, the products cannot meet the needs of consumers.

Adidas’ 2021 financial report shows that Adidas’ global dealer channel accounts for 62%. Compared with domestic brands, Anta is a little more than 30%, and Li Ning has dropped to less than 50%.

In addition, there are supply chain implications.

In the past ten years, international brands such as Nike and Adidas have gradually transferred their production capacity in China to Southeast Asia, led by Vietnam and Malaysia. What they see is lower labor costs and more favorable tax policies, but ignore the stability of supply. Adidas pointed out in the 2021Q3 conference call that markets such as North America, Europe, the Middle East and Africa have been affected by supply chain shutdowns, the inventory rate has fallen to 60%, and the supply shortage will continue to the first quarter of 2022.

The interruption of the supply chain has led to prolonged delivery times and topped inventories, resulting in the “crazy discounts” mentioned above.

Of course, Adidas won’t lie down there.

At least in the Chinese market, we can see that this year, Adidas changed the head of the brand business in China, actively developed the DTC (direct-to-consumer) business, and carried out localization exploration.

In this regard, Cheng Weixiong said that the growth of any brand will definitely have peaks and valleys. From an overall perspective, as a global brand with a century-old history, Adidas has its own tenacity and ability to resist risks. With its capital strength, organizational strength, and global resource allocation, its strength cannot be underestimated.

But it is worth noting that in China, the third largest market for Adidas in the world, domestic consumers’ enthusiasm and demand for apparel products have gradually slowed down. In the first half of this year, domestic GDP increased by 2.5%, per capita consumption expenditure increased by 0.8%, and per capita deposits increased by 10% compared with the end of 2021. In the same period, retail sales of consumer goods fell by 0.7% year-on-year, of which clothing, shoes and hats, and textiles fell by 6.5%.

At the same time, Adidas has to face the rapid development of Chinese local brands. Li Ning’s 2022 interim results show that in the first half of this year, Li Ning achieved operating income of 12.409 billion yuan, a year-on-year increase of 21.7%; Anta’s 2022 semi-annual report shows that Anta’s revenue in the first half of the year was 25.965 billion yuan, a year-on-year increase of 13.8%.

Adidas once said: “China is gradually becoming a more competitive market. We will not maintain the profit margin of 35% in 2018 and 2019, but we believe there is still a chance to recover to around 30%.”

At least in the Chinese market, there is not much time and space left for Adidas.

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