Adidas'S "Channel Rectification" Is Imperative

　　阿迪达斯怎么了？

To answer this question, first of all, we need to analyze briefly what is wrong with Adidas.

In the Adidas annual report, referring to the Greater China market performance, the company CEOHerbertHainer said: "in the fourth quarter, we continued to work hard to rectify the channel and deduct exchange rate factors, which led to a 22% decline in the quarter."

From last year's data, Adidas's Greater China region dropped 16% compared to the same period last year.

Lenovo's media reports that Adidas's major agents in China closed some stores, and some small and medium-sized agents withdrew from the market.

But since Adidas's local competitors in the Chinese market have recorded an annual growth rate of more than 20%, Adidas's performance decline is blamed on the bad market environment under the financial crisis.

That's because pricing is too high to catch price sensitive consumers who have gone through the crisis.

According to HerbertHainer, since Adidas had high inventory problems in early 2009, the company used "additional means to digest inventory under low profit margins". In other words, Adidas should also work hard to promote sales in 2009, which can provide corresponding promotional resources for channel providers.

Then, the "channel rectification" mentioned by Herbert Hainer is worthy of attention.

In fact, in 2009, Adidas implemented a major organizational change, pforming the original vertical organizational structure into a cross functional, cross brand (Adidas and Reebok) new architecture, in which the brand and sales functions were separated, and the global sales business was supervised by HerbertHainer itself.

Most importantly, Adidas divided the sales department into "wholesales" and "retail", and set up a new team to lead Adidas retail business, including the "real estate team" which is responsible for site selection.

In the annual report, Adidas's explanation is: since 2002, Adidas has gradually owned 2212 retail stores (including ADI and Reebok) in the world. From this perspective, "the company has evolved into a company with considerable retail capability", while retail is regarded as the "strategic business" of its future development.

From the financial point of view, the gross profit margin of distribution business in 2009 is 41.6%, while the gross profit margin of retail business is as high as 58.6%.

When Adidas develops its own retail business in a more radical way, the above mentioned "channel rectification" is imperative.

In 2009, Adidas's global distribution business dropped by 9%, but retail business grew by 7% over the same period. The Chinese market was particularly typical. In 2009, Adidas's distribution business in China dropped by 20%, while retail business soared by 57%.

Since the regional differences in the Chinese market are large and the dot com competition has not yet entered a stable period, if Adidas continues to promote its global heavy self retailing business, this may continue to affect its expansion in the Greater China region.

However, in the sports products industry that advocates "light asset operation" for a long time, Adidas's attempt to gradually control the terminal and let the company "reappear" deserves attention.