Adidas sees future in lower-tier cities
German sportswear maker sees two-thirds of growth opportunities outside big cities
Global sportswear giant Adidas sees tremendous growth opportunities in China's lower-tier cities, rather than the nation's big metropolises such as Beijing and Shanghai, as it plays catch-up with market leader Nike in the world's most populated country.
"We still continue to see and believe that two-thirds of growth opportunity is in lower-tier cities," said Colin Currie, managing director of Adidas China. "That's where the growth will be in future."
The German sporting goods maker opened more than 800 new stores on the mainland last year, with more than 400 of them in lower-tier cities.
Adidas reported a 15 per cent sales increase in China last year, growing faster than its rivals including Nike of the United States and home-grown brand Li Ning amid intense competition.
According to market-research firm Euromonitor International, the German brand has an 11.2 per cent share of China's 148 billion yuan (HK$183 billion) sportswear market, trailing only Nike's 12.1 per cent share.
However, Nike posted a sales drop of 12 per cent for its mainland businesses for the fiscal year to November 30.
Urban residents in affluent cities such as Shanghai, owing to their increasing wealth, are more inclined to buy luxury goods now, even though sportswear brands have been viewed as premium products since the 1990s.
But Currie said the market in lower-tier cities had potential as people became attracted to sportswear.
"[These] consumers have more time to participate in activities that may not cost too much," he said. "It's not only OK to wear sportswear for fitness, but also OK to wear it for work or for going to a wedding."
Adidas aims to increase its mainland coverage from 550 cities at the end of 2010 to 1,400 by 2015. It also plans to open an additional 2,500 stores nationwide between 2011 and 2015.
With rising labour costs affecting Adidas' profitability in China, Currie said the key lay in how the company tailored its offerings to mainland consumers.
"There are differences in China," he said. "We just want to understand those differences, so that we can tap into these demands and offer the right products."