Case Study: The Game between Adidas and Channel Provider

Adidas and Nike are clearly aware of the drawbacks of channel agents when they are big. They do not want to see the situation where the channel is ultimately controlled by two or more channel providers, but they do not want to hurt the market because of excessive reforms.

The game between Adidas and Nike and channel agents is underway. After Nike canceled the agency rights of several provincial dealers, Adidas is brewing a series of “power cuts”, but it is directly facing national distributors such as Belle.

Informed sources told reporters that several large sports goods distributors, including Belle, sat down at the negotiation table with Adidas. Dealers want to be able to get rid of inventory pressure, including discount sales of inventory products. However, Adidas does not recognize the above behavior of distributors from the perspective of stable brand prices. The conflict between adidas and distributors is escalating.

Previously, due to overestimation of the Olympics business, many dealers still have large stocks. With the new ordering cycle, many dealers already have no cash to pay for this fee.

Dealer inventory is difficult to digest

Adidas, a partner of the Beijing Olympic Games, announced during the Olympic Games that with a market share of 22%, it surpassed 21% of Nike, an old rival, and became the No. 1 brand in the Chinese sporting goods market.

Its recently released 2008 performance report shows that in all regions except North America, adidas sales have achieved double-digit growth, and its Asian sales have increased by 20%, of which strong sales growth in China has become the main driving force.

Behind its dazzling financial data, it is accompanied by constant escalation of contradictions with domestic distributors. As in 2008, Adidas did not choose to become a global sponsor, but became a sponsor of the Beijing Olympic Games. By April 2009, all products bearing the Beijing 2008 Olympic logo had been declared expired.

Before, because many dealers overestimated the Olympic Games, they got goods before the Olympics. However, the Olympic Games did not bring dealers expected explosive market for the sporting goods industry, resulting in serious inventory of dealers, and many dealers' inventory has not been digested yet.

"Adidas and Nike are both futures systems, ordering half a year in advance, cash on delivery." A dealer in Hunan, Adidas told reporters that because not in accordance with the actual market demand to buy, many dealers backlog of goods piled in the warehouse In, and led to the pressure on the capital.

In order to clean up inventory, dealers around the world are thinking about ways to promote low-cost promotions. But this is not allowed by Adidas - excessive discounts will damage the brand, and consumers will no longer be willing to buy regular prices.

After entering the new sales year, the dealers whose funds are under pressure have to continue to purchase, and the number of purchases cannot decrease too much in comparison with the previous year. Otherwise, the qualifications of dealers will be adjusted from A level to B level, or B From grade C to grade C, the policy of getting goods will be adjusted accordingly. “This is even more harm than good,” said the distributor.

Not only Adidas, in the sporting goods industry, many dealers also represented several brands such as Adidas, Nike, and Li Ning. Each brand had more or less pressure on the goods. However, because of Adidas’ Beijing Olympic sponsor status, its situation seems to be more serious than its competitors.

On the one hand, it is a brand company that vigorously safeguards its own price, brand, and supply policy. On the one hand, it is a distributor who carries inventory and carries the burden. This deadlock since the Olympics has so far plagued the sports giant.

Brand, channel negotiation capability exchange

The reporter was informed that at present, several major domestic sporting goods dealers are negotiating with Adidas, hoping to lower the number of shipments this year. Adidas stated that it may withdraw some dealership rights from some distributors, including even some of Belle’s distributorships.

An Adidas dealer told reporters that from the perspective of Adidas, it is certain that the company’s performance in China can grow steadily. However, many of its achievements in the past year were due to the fact that dealers overestimated the Austrian situation and paid more than actual demand. In 2009, these dealers will certainly reduce the number of re-delivery, which may lead to Adidas' performance this year is "not good-looking." This also forced Adidas to exert pressure on distributors frequently.

The reporter once called Belle's footwear industry director Lei Jinzhao. After hearing the reporter’s intent, she said she was inconvenient to comment and said that reporters can go to learn more about the needs of small and medium-sized distributors.

The person in charge of the adidas marketing department told reporters that there are indeed some inventory problems in the market. Adidas is also actively communicating with dealers to find solutions. So far, all communication between Adidas and the distributors is benign and effective.

According to Ge Xing, a senior advisor for apparel at AMT Consulting, the current stalemate is a reflection of the current role of channel players and brand players in the domestic sporting goods industry at the negotiating table. In the early years, the two giants Nike and Adidas controlled the agents and forced them to expand rapidly.

Among them, Belle has raised a lot of cash through listing in Hong Kong. In recent years, Belle has acquired an integrated channel in the country and quickly took the top spot in the domestic footwear industry. Bao Yuan, with the backing of Taiwan’s Bao Cheng Group, the world’s largest sports shoe manufacturer, is also expanding its site. Coupled with regional distributors such as Shenzhen Longhao, Shenyang Pengda, and Sichuan Jinlang, the domestic channel was 1:30.

In particular, Belle and Baoyuan, they have repeatedly strengthened their control over the channels. "A few years ago, Adidas and Nike were strong. Now the bargaining power of Belle and other channel providers is dominant in the negotiations - if the channels are united by common interests," said Ge Xing, 2006 Belle only a brand of NIKE. Sales are said to have reached 1/4 of the brand's total sales in China.

An industry expert who declined to be named said that through this time negotiations with several major dealers, Adidas and Nike will be more aware of the drawbacks of the larger channel. They do not want to see the situation where the channel is ultimately controlled by two or more channel providers, but they hope that the distributors can also have full competition.

Therefore, how to weaken the dependence on several large-scale channel distributors and develop more small and medium-sized sales channels will be the two most pondering issues for sporting goods giants recently pondering over channels.

Small information: Adidas

Adidas is adidas, a manufacturer of sporting goods from Germany and a member company of Adidas AG. Adidas was named after its founder Adolf Adi Dassler and began producing footwear in Herzogenaurach near Nuremberg in 1920. August 18, 1949 Registered as adidas AG. Adidas’s clothing and sneaker designs usually have 3 parallel strips, which are also visible on its logo. The 3 strips are adidas's features.

Adidas was originally founded by two brothers. After the separation, Adolf’s brother Rudolf Dassler opened the rival sports brand Hummer.

In 1948, Mr. Adi Dassler, the founder of adidas, used the first three letters of his name adi and his last name (Dassler) to synthesize "adidas" as a brand name and to apply for registration; the following year, adidas' third line Trademarks come out.

Adidas’ main rivals are Puma and Nike. In August 2005, Adidas announced the acquisition of Reebok, one of its rivals for US$3.8 billion. The acquisition helped to increase its market share in North America and promoted its competition with “Nike” in this field. The position played in.

Currently Adidas ranks second in the market share of sporting goods following Nike. Adidas's trademark slogan is: There is no impossible (impossible is nothing)