Adidas eyes 20% revenue from own stores

In a major retail push, German sportswear maker Adidas is planning to earn 20% revenue from its own stores in India by 2020. At present, it operates a franchise-based model here, similar to ones followed by its competitors Nike and Puma.

To begin with, the company plans to open around six flagship stores in large cities, measuring 5,000-10,000 square feet. Envisaging larger volumes, it has also opened a 2.6 lakh square-feet centralized warehouse near the Capital to streamline its supply chain, akin to the ones operated by e-commerce companies.

"We want to double our turnover to around Rs 1,600 crore by 2020 from Rs 805 crore at present. These large format stores will help us achieve that," said Dave Thomas, MD of Adidas Group India. "Our franchise partners were earlier hesitant to invest in these big stores. That mindset is changing. However, most of these flagship stores will be owned by us."

Last year, Adidas became the first sportswear company in the country to get government approval to open its own stores.

This year, Adidas wants to turn its focus on its lifestyle brand Adidas Originals, which accounts for a third of its global business but only 5% in here. "We will launch new formats of Adidas Originals stores here. Earlier, Originals products wouldn't sell here. But now, with increased awareness, the products are flying off the shelves. There is a lot of potential in that line," said Thomas.

While around half of Adidas's business here comes from apparel, Thomas said the trend is changing. "People are buying more expensive footwear. Two years ago, the average buying price of a pair of sports shoes was around Rs 3,000. Now, it's around Rs 5,000," said Thomas.

Adidas to broaden footprint via omni-channel stores

German sportswear major adidas is looking to establish its footprint in India not just through increased offline and online presence, but also by firming up the omni-channel strategy.

The omni-channel or multiple channel retailing will let its shoppers order products online from adidas’ standalone stores.

According to Dave Thomas, adidas India, MD, these stores will be equipped with tablet PCs for placing orders.

A successful pilot (for multiple channel retailing) earlier this year, followed by introduction across 25-odd stores so far, has seen increased demand for offerings “by thousands”.

“This is of great benefit to us (the company), especially in the smaller franchise units, where the entire range of offerings cannot be displayed. We intend to increase the number of such stores,” he said. adidas has a product line of 5,000-odd items.

Omni-channel stores will be shored up to 200 by the year-end and, to 400, by mid-2016.

In terms of delivery of products, adidas will be relying on its e-commerce partners.

Revenues will be split between the e-commerce partner and the franchisee from where the order has been placed.

“There is a revenue sharing model that is there. It will help both as business will not be taken away from either of them,” Thomas said.

India, currently, accounts for 15 per cent of the company’s emerging market sales. Emerging markets include 78-80 countries across West Asia, South Asia, Indian sub-continent and Africa.

According to sources, the omni-channel presence will also reduce conflicts between online and offline stores.

Online strategy for adidas, include a separate product range dedicated for e-retailers.

The company is also looking to increase its offline presence (brick and mortar stores).

It currently has 760 stores across three brands – adidas (500-odd stores), adidas Originals (11) and the US-based Reebok that it acquired in 2006 (249-odd).

The plan is to increase the store count to 1,000 over the next three to five year period.

Meanwhile, adidas has also proposed 100 per cent foreign direct investment scheme (for single brand stores) to the Department Industrial Policy & Promotion (DIPP), in addition to ‘only franchise’ format, it currently operates here.