Adidas eyes double-digit growth in China as it deepens reach in lower tier cities
Adidas said it expects double-digit growth in China this year as the German sportswear giant continues to expand in its fastest growing market while deepening reach among young consumers in lower tier mainland cities.
Most brands, including multinational and Chinese ones, are increasingly looking at driving growth by tapping the potential of smaller mainland cities, avoiding the clutter and competition seen in top-tier markets, market watchers said.
Adidas has increased its forecast of global sales and earning until 2020, driven by factors including “continuing rapid growth in China”, which stands out as the firm’s most profitable and second largest market in the world, chief executive Kasper Rorsted said on Thursday in Shanghai.
Through till 2020 annual global sales are expected to grow at between 10 per cent and 12 per cent on average, from a previous “high single-digit growth”, while net income from continuing operations is projected to see growth of 20 per cent to 22 per cent, up from 15 per cent previously.
The company is expecting double-digit growth in China this year, driven by the country’s economic growth and an under penetrated sports market, he added.
In 2016, Adidas sales in mainland China, Hong Kong and Taiwan grew 28 per cent year on year to €3 billion (US$3.2 billion), on a currency-neutral basis.
The company has already deepened its roots in lower-tier mainland by reaching out to more consumers as wealth accumulation began to spread out from major cities like Shanghai and Beijing.
The mainland economy grew a better-than-expected 6.9 per cent in the first quarter, compared with last year’s 6.7 per cent growth.
“Adidas has been trying to build a strong emotional resonance with young people, encouraging them to be themselves and not be held back by stereotypical boundaries and norms,” said Chirantan Ray, Shanghai managing director for market research firm Kantar Millward Brown.
Considering the size of the millennial market, the key to success is building strong emotional resonance with young people as well as embracing innovation to differentiate between competitors in the sportswear category, he said.
China’s entire apparel industry is benefiting from the central government’s promotion of sports and a healthy lifestyle, the end of the one-child policy, and the rise of e-commerce, he added.
Adidas currently has 10,000 stores in China and plans to have 12,000 stores in place by 2020 as it reaches out to more consumers, especially in lower tier cities, said Colin Currie, managing director of Adidas Greater China.
The company is also benefiting from a jogging craze in China, Currie said.
Adidas will expand its distribution centres to three by 2019, from the current two in Suzhou and Tianjin.