adidas own the game presentation

How adidas is owning the digital transformation game

3 ways adidas is reinventing itself for the digital age.

On March 19, 2021, Adidas outlined a new 5-year growth plan dubbed “Own the Game.” The goal? Double online sales to €9 billion by 2025 while boosting profit margins and working towards climate neutrality. 

Critical to this endeavor is Adidas’ embrace of digital technology and automation. According to a blog post outlining the “ Own the Game ” strategy, “the company's digital transformation is driven by investments of more than € 1 billion until 2025. Core processes across the entire value chain will be digitalized: from the creation process with 3D design capabilities, via the sourcing of its products to selling it to customers and consumers. In 2025, the vast majority of adidas’ sales will be generated with products that were created and sold digitally. To achieve this, the company will expand its data and technology expertise internally and increase the size of its tech team. In 2021 alone, adidas will hire more than 1,000 tech and digital talents. The company is also investing into the new ERP system S/4HANA.”

According to additional reports , the S/4HANA will be fully integrated with AWS. Not only will the deployment of SAP on AWS streamline the company’s global supply chain, inventory, and merchandising operations, it will enable the company to leverage machine learning techniques to deliver personalized customer experiences such as product and fit recommendations. They also hope to use the technologies to create digital twins of products to help accelerate and increase the efficiency of the product development process. 

Via a 2021 statement, Markus Rautert, senior VP, technology enablement at Adidas AG, explained, “We want to drive innovation across our business, which includes everything from how we design our products to how we engage with the consumers who buy them. By committing to cloud infrastructure, we have the scalability and elasticity we need to handle the seasonality of our business during peak demand, and support the projected growth in our e-commerce business in the years to come. Deploying SAP environments on AWS isn’t just about transforming our technology, it’s about transforming business opportunities and using AWS’s wide range of cloud capabilities to create efficiencies and bring us closer to consumers.”

adidas sews a data mesh

By decentralizing and democratizing enterprise data, data mesh architecture has emerged as a powerful enabler of digital transformation. With this in mind, adidas too has transitioned from a monolithic, centralized data architecture to a data mesh.

As adidas’ Director Platform Engineering, Javier Pelayo, exclaims in a recent blog post that outlines how they successfully implemented a data mesh (which we highly recommend you read ,  “ We can proudly say that adidas has been successful in the Microservices journey; definitely, applying the same concepts to democratise the access to the data was a clear field of investment.

Also, to complete the context, we implemented a Data Streaming strategy based on Kafka that was following the main principles:

• Domain-oriented decentralized data ownership and architecture
• Self-serve data infrastructure as a platform”

Welcome to Ozworld

Like many retailers looking to target younger generations of consumers, adidas is diving headfirst into the Metaverse. Phase one began in late 2021 when the launched and sold their first NFTs, the total sales of which amounted to over $22 million . 

Phase two began in April of 2022 with the launch of Ozworld, the world’s first personality based, AI generated avatar creation platform, to help promote its OZWEEGO series of physical footwear. In short, after completing a highly designed, interactive questionnaire, Ozworld’s AI generates an individualized adidas-branded Avatar that can be downloaded and used across the web. 

To celebrate the launch of Ozworld, they also co-hosted an online event at Tencent Music Entertainment Group’s virtual music festival TMELAND. Using their Ozworld Avatars, users could attend a “concert” featuring Jay Park and MC Jin as well as socialize with friends and walk a virtual catwalk to show off their avatars. 

Advancing the sustainability blockchain

Over the past decade, adidas has emerged as a pioneer of sustainability. In addition to increasing the use of recycled materials in their products, the company has also vowed to reduce GHG emissions across its entire value chain by 30% by 2030. 

Quantifying the environmental impact of a single garment is an incredibly difficult process. Organizations must look at everything from where the product was made, material waste and how the original raw materials were sourced, amongst a few dozen more variables. 

In order to overcome these challenges, adidas partnered with TrusTrace to more effectively aggregate and leverage material traceability data. According to TrusTrace’s website , “adidas chose Certified Material Compliance and they've integrated their systems with TrusTrace, ensuring seamless data flow between PLM, Purchase Order System, and Supplier Management systems. Besides automated data flows, the integrations also ensure data quality, as the data is continually updated, capturing last minute changes to designs or purchase orders. adidas and the TrusTrace Business Services team also worked in tandem to onboard hundreds of suppliers and get them familiar with how to share documentation on TrusTrace within the first months.” 

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Adidas Presents Growth Strategy ‘Own The Game’ Until 2025

Virtual Investor & Media Day

On March 10, 2021, adidas introduced its new strategy ‘Own the Game’ at a virtual Investor & Media Day. Main strategic focus of ‘Own the Game’ is to strengthen the credibility of the adidas brand, to create a unique consumer experience and to continue to expand the company’s activities in the area of sustainability. The new strategy is designed to significantly increase sales and profitability as well as gain market share until 2025. More than 95% of sales growth is expected to come from the five strategic categories: Football, Running, Training, Outdoor, and Lifestyle. As building direct relationships with its target audience plays an increasingly important role, adidas will evolve its operating model to address consumers more directly. As a result, the company’s direct-to-consumer (DTC) business is projected to account for around half of the company’s total net sales by 2025 and to generate more than 80% of the targeted top-line growth. The company’s e-commerce business is forecast to double to between € 8 billion and € 9 billion. From a market perspective, the company will focus on Greater China, EMEA (Europe, Middle East, and Africa) and North America. Overall, these three strategic markets are expected to account for around 90% of sales growth until 2025. In addition, nine out of ten adidas articles will be made from sustainable materials by 2025. The company draws confidence from the success of its previous strategy ‘Creating the New’, its strong market position as well as attractive growth prospects for the sporting goods industry as a whole.

“Own the Game” is a growth and investment strategy

“Own the Game” is a growth and investment strategy, which will lead adidas into a successful future. Our strategy is deeply rooted in sport, puts the consumer at the heart of everything we do and is brought to life by our people. Our strategic focus is on increasing credibility of the adidas brand, elevating the experience for our consumers and pushing the boundaries in sustainability,” said adidas CEO Kasper Rorsted. “To successfully execute our strategy, we will continue to significantly invest into our people, our brand and the digital transformation of the company.”

Strong growth of sales, profitability, and cash flow

With its new strategy, the company aims to increase sales by an average of between 8% and 10% per annum on a currency-neutral basis over the four-year period between 2021 and 2025. Gross margin is forecast to expand to a level of between 53% and 55%, and the operating margin to a level of between 12% and 14% by 2025. Net income from continuing operations is also projected to increase substantially by an average of between 16% and 18% per year over the four-year period between 2021 and 2025. Driven by the significant top-line growth and strong bottom-line expansion, adidas will generate substantial cumulative free cash flow until 2025. The majority of this – between € 8 billion and € 9 billion – will be distributed to shareholders through regular dividend pay-outs in a range of between 30% and 50% of net income from continuing operations, complemented with share buybacks.

Given the impact of the coronavirus pandemic, the company’s financial ambition has the 2021 financial year – rather than 2020 – as a baseline. For 2021, the company expects currency-neutral net sales to increase at a mid- to high-teens rate. Gross margin is forecast to increase to a level of around 52% in 2021 and the operating margin is projected to rebound to a level of between 9% and 10%. Net income from continuing operations is anticipated to increase to a level of between € 1.25 billion and € 1.45 billion this year.

Investing into people, the brand, and digitalization

To successfully deliver on its strategy, adidas intends to invest consistently into its people and its unique workplace. Furthermore, adidas will continue its efforts to ensure there is a level playing field for all, as the company continues its Diversity & Inclusion journey. Investments into product development, marketing, sponsoring and the company’s digitalization are also set to increase significantly over the next five years. adidas plans to invest around € 1 billion more into the brand in 2025 compared to 2021. By 2025, the digital transformation of the company will have been driven forward with investments amounting to over € 1 billion as well.

‘OWN THE GAME’ – OVERVIEW

Credibility

adidas will sharpen its market position in Sport and Lifestyle through a clear brand architecture. In Sport, the company will focus on the four most important categories: Football, which is the biggest sport in terms of viewership, as well as Running, Training, and Outdoor, the three biggest participation sports. In the company’s lifestyle segment, adidas introduces Sportswear as a new consumer proposition to address the growing relevance of the ‘athleisure’ trend toward sport-inspired leisurewear. At the same time, Originals will be extended into the premium segment to ensure a stronger distinction of the respective product offerings going forward. Until 2025, the five categories Football, Running, Training, Outdoor, and Lifestyle are expected to account for more than 95% of revenue growth.

adidas is committed to attracting more female consumers. In order to achieve this, the company will execute on a cross-category plan to achieve product excellence and to elevate the women’s experience with the goal to grow currency-neutral net sales for its Women’s business at a mid-teens rate on average per year between 2021 and 2025.

Consumers expect to receive a brand and shopping experience tailored to their preferences, with personalized offerings in both digital and physical spaces. The transformation into a direct-to-consumer-led business built around membership, enabled by a network of own-retail stores and e-commerce, will therefore play an even more important role for adidas in the future. Sales through DTC channels are projected to account for around half of the company’s total net sales by 2025 and to generate more than 80% of the company’s increase in sales until 2025. The company’s own e-commerce net sales are expected to double from currently more than € 4 billion to between € 8 billion and € 9 billion. To achieve this, adidas will continue to invest into e-commerce and into expanding its membership program. In 2025, adidas aims to have tripled the number of members in its membership program from the current level of more than 150 million to around 500 million. In addition, adidas’ own-retail stores will be digitized with fully-fledged omnichannel capabilities. The focus on increasing digitalization will be expanded to the company’s wholesale partners to ensure a seamless experience for the consumer across all touchpoints.

adidas also seeks to drive membership through its engagement in megacities, doubling the number of Key Cities from six to twelve: The company will build on its existing Key Cities portfolio of Tokyo, Shanghai, Paris, London, New York, and Los Angeles, by adding Mexico City, Berlin, Moscow, Dubai, Beijing, and Seoul. In addition to these twelve Key Cities, the strategic markets Greater China, EMEA (Europe, Middle East, and Africa) and North America continue to increase in importance. The company plans to invest overproportionately in these markets to gain market share, as they are expected to jointly account for around 90% of net sales growth until 2025.

Sustainability

For over two decades, sustainability has been an integral part of adidas’ philosophy. A philosophy rooted in the company’s purpose that through sport adidas has the power to change lives. In the years to come, adidas will once again significantly expand its commitment to sustainability and move to a comprehensive consumer-facing program with a sustainable offering at scale. Already today, six out of ten adidas articles are made from sustainable materials. By 2025, nine out of ten will be sustainable as the company expands and further innovates its 3-loop system: recycled loop (made from recycled materials), circular loop (made to be remade), or regenerative loop (made with natural and renewable materials). adidas has been researching fully recyclable or biodegradable materials for some time already and aims to only use recycled polyester in every product from 2024 onward. In addition, the communication and marketing for products made from sustainable materials will be intensified, while product takeback programs will be rolled out at a large scale. adidas is committed to reducing its CO2 footprint per product by 15% by 2025. To this effect, the company is working closely with its partners in the global supply chain to reduce energy and material consumption and make greater use of green energy sources. adidas aims to achieve climate neutrality in its own operations by 2025 and overall climate neutrality by 2050.

The execution of ‘Own the Game’ is supported by the further digitalization of the company as well as innovation across all dimensions of adidas’ business.

The company’s digital transformation is driven by investments of more than € 1 billion until 2025. Core processes across the entire value chain will be digitalized: from the creation process with 3D design capabilities, via the sourcing of its products to selling it to customers and consumers. In 2025, the vast majority of adidas’ sales will be generated with products that were created and sold digitally. To achieve this, the company will expand its data and technology expertise internally and increase the size of its tech team. In 2021 alone, adidas will hire more than 1,000 tech and digital talents. The company is also investing into the new ERP system S/4HANA.

adidas will strengthen its innovation mindset across all areas of the company over the coming years in order to continue to enable ground-breaking innovations, as already demonstrated in the past with the Boost technology or the partnership with Parley for the Oceans. Recent examples of such innovations are Futurecraft.Strung, a running shoe with an upper based on athlete data – to be launched in 2022 – or new vegan and recyclable versions of the popular lifestyle silhouette Stan Smith. adidas aims to make one of its most important and most successful franchises the most sustainable in its entire product portfolio. Further innovations include several new tech platforms in Running, a swipe mechanism for product feedback incorporated into the adidas app as well as dedicated and sustainable Outdoor stores in the Alps called Terrex Mountain Lofts.

At the Olympics and major marathons, adidas athletes will compete in the adizero Adios Pro 2. The running shoe is the second generation of the adizero Adios Pro that was successfully launched in the second half of last year and in which both Peres Jepchirchir and Kibiwott Kandie set new world records in the women’s and men’s half marathon. Further innovations to create sustainable products and processes are already in the making. In the coming months, adidas will launch the Ultraboost DNA Loop in larger quantities for the first time. Once this version of the successful running shoe reaches the end of its life cycle, it can be shredded to pieces and reused.

‘Creating the New’ as strong foundation

The company’s new strategy ‘Own the Game’ builds on ‘Creating the New’, the strategy adidas has successfully executed over the past five years from 2016 to 2020. ‘Creating the New’ was introduced in March 2015 and centered around three strategic priorities: Open Source partnerships, Key Cities and driving Speed in product manufacturing. Digitalization, strengthening adidas’ positioning in North America, the standardization of processes under ONE adidas, and sharpening the brand portfolio were then added in 2017.

Despite the negative impact resulting from the global coronavirus pandemic in 2020, ‘Creating the New’ enabled the company to grow significantly in its strategic growth areas and to gain market share: During the five years between 2015 and 2020, sales doubled in both North America and Greater China, whereas e-commerce sales increased sevenfold. For the period 2015 to 2019, prior to the coronavirus pandemic, adidas successfully increased sales by a total of around € 7 billion, operating margin improved around 5 percentage points, net income from continuing operations grew by around € 1.2 billion, while at the same time marketing investments increased by more than € 700 million. The strong operational performance also translated into attractive shareholder returns. During the five-year period of ‘Creating the New’, the adidas share price more than tripled.

Kasper Rorsted, Chief Executive Officer of adidas AG

Kasper Rorsted said: “Together with our more than 60,000 adidas employees, I look forward to executing our new strategy. ‘Own the Game’ will enable us to continue growing in an attractive industry, gaining market share, and creating sustainable value for all our stakeholders. By 2025, adidas will be stronger, more sustainable and more digital than ever before.”

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Adidas presents growth strategy ‘Own The Game’ until 2025

Strategic focus on direct-to-consumer, e-commerce, consumer experience.

Adidas introduced its new strategy ‘Own the Game’ at a virtual investor & media day. Main strategic focus of ‘Own the Game’ is to strengthen the credibility of the adidas brand, to create a unique consumer experience and to continue to expand the company's activities in the area of sustainability .

The new strategy is designed to significantly increase sales and profitability as well as gain market share until 2025.

As building direct relationships with its target audience plays an increasingly important role, adidas will evolve its operating model to address consumers more directly. As a result, the company’s direct-to-consumer (DTC) business is projected to account for around half of the company's total net sales by 2025 and to generate more than 80% of the targeted top-line growth.

The company's e-commerce business is forecast to double to between € 8 billion and € 9 billion. 

Investment into digital transformation

“Our strategic focus is on increasing credibility of the adidas brand, elevating the experience for our consumers and pushing the boundaries in sustainability,” said adidas CEO Kasper Rorsted. “To successfully execute our strategy, we will continue to significantly invest into our people, our brand and the digital transformation of the company.”

Investments into product development, marketing, sponsoring and the company's digitalization are set to increase significantly over the next five years. adidas plans to invest around € 1 billion more into the brand in 2025 compared to 2021. By 2025, the digital transformation of the company will have been driven forward with investments amounting to over € 1 billion as well.

The company's digital transformation is driven by investments of more than € 1 billion until 2025. Core processes across the entire value chain will be digitalized: from the creation process with 3D design capabilities, via the sourcing of its products to selling it to customers and consumers. In 2025, the vast majority of adidas’ sales will be generated with products that were created and sold digitally. To achieve this, the company will expand its data and technology expertise internally and increase the size of its tech team. In 2021 alone, adidas will hire more than 1,000 tech and digital talents. The company is also investing into the new ERP system S/4HANA.

channels: e-commerce , digitization , fashion , innovation management , investments

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Three Stripes Business Model of Adidas

One brand that dominates the mindshare while consumers think of Hip Hop and sporty brands is Adidas. So much so that Adidas is now one of the most desirable sportswear brands. Adidas produces various sports equipment across different types of sports. But then the question is what is the business model of Adidas that is helping the brand rule the sportswear industry across all the sports (obviously next to Nike).

As of 2020, Adidas had a turnover of  €19.844 billion  and has approximately  62,285 employees  worldwide. From establishing itself as one of the best sportswear, it has also been working towards establishing itself as one of the best CSR companies globally (as of 2020).

How it all Began?

The foundation for Adidas was laid in  1920 by Adolf Adi Dassler , a 20-year old German who was an extremely passionate athlete. He started producing shoes outside his mother’s laundry room using limited materials available post WW1. Initially, he did not intend to sell sneakers and had completed his apprenticeship in a bakery before he started selling his sneakers to produce the best shoes for passionate athletes.

He understood the need for high-quality sports equipment and regularly visited the athletes to seek feedback on what these athletes truly desired. Such observations and a genuine desire to help athletes further encouraged Adolf to develop products that would better the consumers’ lives.

Currently, Adidas has products in the  following category  

• Accessories and Gear

In July 1924, the business was established as “Dassler Brothers Shoe Factory” (Gebrüder Dassler Schuhfabrik), which was later joined by his elder brother. It was only in 1936 that the brand found true success when Adi gifted shoes to the gold medallist Jesse Owen an American track-and-field star, who also made a world record in the 1936 Berlin Olympics. The business became quite successful and was selling 200,000 shoes each year until WWII hit.

After WWII in 1947, the brothers had a clash and they split. Rudolf formed another shoe company known as Puma, which is now considered one of the strongest rivals of Adidas.

Fun Fact: The complete form of Adidas is  ‘All Day I Dream About Sports.’ Initially, in 1949  the logo was a spiked shoe hanging in between the letter ‘d’

Adidas logo developed its famous three strips from the original founder Karhu Sports, who was short on capital post-WWII. The owners decided to sell the trademark of their logo for €1,600 and two bottles of whiskey. As per Economic Times , The three-stripes of the Adidas logo represent a mountain, pointing out challenges and goals people need to overcome.

It was only in 1971  that the brand unveiled the three-stripe Adidas logo in the form of a leaf called the “trefoil.” This version was later replaced in 1990 by the current logo, shaped like a triangle for the Equipment Line but later became the corporate logo, though the trefoil logo can still be found on some Adidas original products.

Adidas Business Model is based on integrating hip hop culture and sports

In 1970  the brand delivered its football for the 1970 World Fifa Cup and designed the ball in such a way that it would increase the visibility on the black and white screen, and this soon led to one of the most successful and famous partnerships of Adidas providing footballs to Fifa World Cup after that.

In 1986, the brand expanded and entered the hip-hop culture and soon became a household name and a lifestyle. Unknown to Adidas, the hip hop group Run DMC wrote a song about their shoes, “My Adidas,” and held up the 3-Stripes shoes during the concert in front of 40,000 fans – amongst which was an Adidas employee, and it led to an unexpected partnership.

It was the first time that sport and art were merging, which led to the brand’s growth over a much larger audience and customer base. This led Adidas to develop new ways of marketing, which was considered as of the critical areas of the company, which led to its success and allowed it to achieve a competitive advantage.

Adidas Marketing Strategy

One of the most famous taglines of Adidas is ‘ Impossible is Nothing,’  which focuses on the importance of fitness and the importance of striving for something that a person truly desires and is also one of the primary marketing strategies for the company.

Furthermore, it has also sponsored many world sports events such as FIFA, UEFA, NBA, Cricket & Olympics. At the same time, it is also known to provide the best products which are comfortable, long-lasting, and beyond the ordinary.

Moreover, it also takes advantage of 6 major cities, which helps shape the trend and the buying decisions of the targeted customers.  These cities are Los Angeles, London, Shanghai, New York, Tokyo, and Paris. In the UK, it primarily focuses on selling soccer products, whereas it focuses on basketball and baseball in the US. Adidas ensures that the marketing strategy meets the needs of consumers globally.

The collaboration of Adidas with various athletes and significant-tech companies has allowed it to enhance innovation with branding and marketing. This has led to the development of a more vital relationship with the customers ensuring customer loyalty. It also collaborates with celebrities which includes music and fashion icons. Thus, the strategy is to build must-have designs that reach out to more than just sports fanatics.

This can be seen when Adidas created Yeezy with Kanya West. It turned out to be one of the fastest-growing footwear lines and, in 2021, was valued between $3.2-$4.7 bn. This has allowed it to expand the customer base and reach out to those customers who are not sports fans.

Yeezy is worth as much as $3 billion, according to a Bank of America valuation. Kanye West made about $147 million from Yeezy shoe royalties last year. That's more than his entire music catalog is worth – valued at $110.5 million by the Valentiam Group. https://t.co/YJ90ZOvIbA — Kim Bhasin (@KimBhasin) April 27, 2020

Nike also has a powerful marketing strategy. Do check out!

Adidas’ powerful distribution network

Another competitive advantage that Adidas has is its distribution channel. Globally it has around 2500 stores. The global supply chain of Adidas extends to various tiers from manufacturing partners to raw materials such as cotton, leather, and natural rubber and the use of technology.

The majority of the products are produced by 132 manufacturing partners worldwide. At the end of 2020, 61% of the strategic suppliers had worked for more than ten years, and 30% worked for more than 20 years.

As of 2020, it outsources most production and has 500 independent factories globally that manufacture products in more than 49 countries. Its supply chain has different types of business partners and also has multiple layers. As of 2020, the top 4 countries in terms of sourcing volumes were:

How Adidas is adding sustainability to its business model

Back in 2015, Adidas collaborated with Parley for the Oceans, an environmental organization. One of the primary goals of Adidas is to double the number of recycled sneakers. In 2021, Adidas aims to produce 17 million pairs of shoes with recycled plastic waste collected from beaches and coastal regions, after more than 15 million in 2020.

Sustainability is an integral part of the Adidas business philosophy. We have continued to invest in sustainability initiatives during the coronavirus pandemic, and we will significantly expand our range of sustainable products in 2021. Adidas chief executive officer Kasper Rorsted in a press release.

Furthermore, it is also currently focusing on eliminating the use of fur and focusing more on using plant-based leather, recycled cotton, and eco-friendly shoes to achieve by 2050 complete global neutrality.

As per the company’s press release , six out of ten Adidas articles are made from sustainable materials. By 2025, nine out of ten will be sustainable as the company expands and further innovates its 3-loop system: recycled loop (made from recycled materials), circular loop (made to be remade), or regenerative loop (made with natural and renewable materials). adidas has been researching fully recyclable or biodegradable materials for some time already and aims to only use recycled polyester in every product from 2024 onward.

Moreover, the sustainability bond amounting to €500 million was issued in September 2020, which was five times oversubscribed. The proceeds from the offering are planned to be used in targets like achieving recycled materials, investing in renewable energy production, and supporting underrepresented communities.

Adidas 2021 Business Strategy- Own The Game

In 2021 Adidas released its next five-year strategic cycle where ‘ Own the Game ‘ puts higher preferences to the consumer than everything else by acknowledging the role they have in shaping the trends in the industry. The “Own The Game” strategy of Adidas centers around a shift towards a DTC-led business model.

As part of the new strategy, Adidas aims for its direct-to-consumer business to account for half of its total sales by 2025 and contribute more than 80 percent to the company’s targeted revenue growth until then. By 2025, Adidas aims to triple its members to around 500 million, all while doubling its e-commerce sales to around $10 billion. In addition, Adidas’ own retail stores will be digitized with fully-fledged omnichannel capabilities.

Furthermore, the successful delivery will also ensure brand credibility, improve the consumers’ experiences, and push the boundaries of sustainability. Another aim of this strategy was to begin the formal process of divesting Reebok, which was needed to ensure the independent growth of each other and exploit its capabilities.

In conclusion, Adidas surely has blended the culture of hip-hop and sports and has successfully captured the interests of the consumers, giving comfort its highest priority. Adidas has built a business model that observes consumer trends and maintains high-quality manufacturing and innovative materials. Adidas has already pledged to strengthen its innovation mindset across all areas of the company over the coming years in order to continue to enable ground-breaking innovations.

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Kashish M is an Undergraduate student from the Middle East. Apart from listening songs and learning new languages and exploring different culture over time she developed interests in writing and gained interest in exploring different parts of the accounting/finance world.

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Adidas Investor Day 2021: “Own the Game” Strategy Focuses on Brand Credibility, Consumer Experience and Sustainability

What's Inside

The Coresight Research team attended Adidas virtual Investor Day 2021 on March 10, 2021. In this free report, we present key insights from the event, covering the company’s performance in 2020 the three initiatives central to its “Own the Game” strategy moving forward.

Click here to read more Coresight Research coverage of Adidas.

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adidas Shifts Focus to Digital Sales With New Growth Strategy

The five-year plan is aimed at strengthening the brand’s credibility and increasing profitability..

adidas has announced a new five-year growth strategy called “Own The Game,” in which the company plans to focus on growing its online sales.

The company unveiled the new strategy at a virtual investor and media day and said it expected more than a 95 percent sales growth from five strategic categories, which include running, training, lifestyle, outdoor, and football.

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Strategy Information

With sport playing an increasingly important role in more and more people’s lives, both on and off the field of play, we operate in a highly attractive industry. Based on the authenticity of the adidas brand and our constant efforts to understand our consumers’ needs, we aim at capitalizing on the acceleration of favorable long-term structural trends by pushing the boundaries of products, experiences, and services.

Since the creation and launch of our ‘Own the Game’ strategy, the economic and political environment we operate in has significantly changed. Macroeconomic challenges as well as geopolitical tensions have had an adverse impact on our business, our consumers, and business partners. Paving the way for a restart, Bjørn Gulden joined adidas as new CEO in January 2023. In this context, we are currently conducting a thorough strategic review, which also includes the financial ambition for 2025. We will provide an update on the outcome of this review in the course of the second half of 2023 and, in the meantime, continue to diligently execute our functional priorities.

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Adidas presents growth strategy 'Own the Game' until 2025

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Own the Game Growth Strategy of Adidas

Adidas has been focusing on expanding its market through a renewed approach to marketing and product innovation over the recent years. The sports shoes industry has grown highly competitive and adidas is aggressively focusing on marketing and branding to cement its position in the global market. Adidas is a leading rival of Nike. However, there are several more brands contending for market share in the sports shoes and apparel industry including Under Armour, Puma , and other similar brands like New Balance, Lululemon and ASICS. Nike is an established leader in the sports shoes industry and a renowned marketer. In order to maintain its competitive edge and market position against a market leader like Nike, Adidas is now focusing heavily on strengthening its credibility and market image. In 2021, the company announced a new strategy called ‘Own the Game’. There are three main focus areas of this strategy which include establishing brand credibility, creating a unique consumer experience, and making its operations more sustainable. The new strategy has a slightly long-term focus which is to expand market share by 2025.

However, Adidas is engaged in an aggressive battle against mighty opponents where most players are aggressively investing in digital technology to achieve higher market penetration, customer reach and to offer their customers a superior experience. Adidas has created its new strategy to drive sales and profitability higher where most of sales growth, around 96% is expected to come from five key categories: Football, Running, Training Outdoor and lifestyle. Customer experience and customer relationships will also play a key role in helping the company expand its market share faster. Apart from that, a key focus of the plan will be the digital transformation of the company. The company will invest heavily in strengthening its ecommerce operations as it expects the Direct to Consumer channels to account for a substantial part of the company’s revenues in the coming years. The company expects the Direct-to-Consumer channels to account for around half of its total net sales by 2025. The ecommerce channels will also drive above 80% of its targeted top line growth. Key focus areas of the ‘Own the Game’ Strategy There are five important focus areas that Adidas is targeting through its new Own the Game Strategy. They include credibility, experience, sustainability, customer experience, digital and organization wide innovation. How the company will act on the five pillars is detailed below:

Credibility: A clear brand architecture is an important step towards growing brand equity and achieving higher clarity in the market place. The brand architecture helps the target audience relate with the brand and its products. It refers to how the products in the brand’s portfolio are organized. Adidas plans to improve its market position in the sport and lifestyle categories through a more clear brand architecture. The company’s focus will remain on four key product groups in the Sports category including Football, running, training and outdoor. Adidas is also growing its focus on improving the product portfolio in the athleisure category since customer demand for such products has kept growing in the recent years. Apart from these things, the company’s focus will be on growing the range of Adidas Originals in the premium segment to achieve stronger differentiation. Adidas expects that the five key categories including running, training, football, outdoor and lifestyle categories will drive more than 95% of the company’s revenue growth. The company will also invest in attracting more female consumers. Improving customer experience for female consumers and the portfolio of products made for female customers will help the company improve the sales among female customers. Between 2021 and 2025, the company expects to improve the sales of products for females at a mid-teens rate. All these steps will help the company improve its credibility among consumers globally.

Customer experience: The focus on customer experience needs to be higher since customers globally want a more personalized shopping experience tailored to their preferences. Adidas needs to transform into a direct to consumer led business. Its mix of ecommerce and physical channels centered on a membership model will play a critical role for the company in the future. Its digital channels will be driving most of the company’s sales growth in the coming years. By 2025, the digital channels will generate more than half of the company’s net sales and will be responsible for more than 80% of the company’s growth in net sales. Between 2021 and 2025, Adidas expects to more than double its sales from ecommerce channels. It will require higher investment in its ecommerce capabilities. The company expects to grow its ecommerce revenues which were higher than 4 billion Euros in 2021 to between 8 and 9 billion Euros by 2025. Apart from strengthening its ecommerce capabilities, the company will also expand its membership program to grow its ecommerce revenues. Adidas has around 150 million members currently and expects to more than treble the number by 2025. According to its plan, the number of memberships must reach around 500 million by 2025.

Adidas will also continue to invest in improving its instore experience through digitization of stores. These stores will be digitized will full-fledged omnichannel capabilities. Adidas will also focus on higher customer engagement in the megacities which have been a central focus of its growth plan over the past several years. The company is now focusing on more such cities and doubled the number of megacities included in its plan. The following cities are going to be the main target of Adidas in terms of customer engagement and membership expansion: Tokyo, Shanghai, Paris, London, New York, and Los Angeles, by adding Mexico City, Berlin, Moscow, Dubai, Beijing, and Seoul. However, apart from these cities, the company has also decided to grow its focus on key market segments including Greater China, EMEA and North America. These three geographical segments are expected to drive more than 90% of the company’s growth until 2025.

Sustainability: Adidas has already been focusing on sustainability for more than a decade. It has remained an integral pillar of its brand philosophy over the past several years. However, the company is now planning to significantly expand its sustainable offerings and its commitment to sustainability programs in its business operations. Currently, it has 60% of the products in its portfolio made up of sustainable materials which it plans to grow to 90% by the year 2025. The company is planning to further innovate its three-loop system which includes: – Recycled loop: made from recycled materials. – Circular loop: made to be remade. – Regenerative loop: made with natural and renewable materials. Over the past several years, the company has been researching fully recyclable or biodegradable materials. By 2024, the company aims to only use recycled product by 2024. The company will also grow its focus on marketing and promotion of sustainable materials. Adidas will also rollout its takeback programs at a larger scale. The brand has committed to reduce its CO2 footprint per product b 15% by 2025. It aims to achieve carbon neutrality in its operations by 2025 and total neutrality by 2020. It is also working closely with its supplier partners to reduce energy and material consumption and increase the use of green energy resources.

Digitalization: The company plans to invest around 1 Billion Euros by 2025 to faster digitalize its processes. It plans to first digitalize the core processes in its value chain including sourcing, creation and sales. By 2025, the company expects to generate a large part of its net sales from the products that were made and sold digitally. This will require investment in the expansion of its tech team and increase in its data and technological capabilities. Adidas had planned to hire at least 1000 extra tech personnel in 2021 alone. It is also investing in a new ERP system S/4 HANA.

Innovation: Continuous innovation is the key to faster growth in all industry sectors including the sports shoes industry. Companies including Adidas, Nike and others like Lululemon are investing in continuous innovation to grow their market share and revenues faster. Adidas is also focusing on making innovation a part of its company culture. It has already demonstrated superior performance through innovations like Boost technology in the past. Some examples of more recent innovations by Adidas include Futurecraft.Strung and recyclable versions of the popular lifestyle silhouette Stan Smith. Adidas is also working on creating more innovations that will make it easier for the company to develop more sustainable products and processes.

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