Français
简体中文
China is plunging Adidas back into trouble. The German sportswear manufacturer, which is only just recovering from the end of its collaboration with the American rapper Kanye West, now finds itself at the centre of a corruption scandal allegedly involving employees of the group in China. An anonymous letter and bribes too, according to the Financial Times… The allegations of corruption have quickly spread around the world. So much so that Adidas acknowledged on Monday that it was conducting a “thorough investigation” into the matter, which is said to have benefited several of its Chinese employees. Among them, a senior manager in the marketing budget department is alleged to have received several million from the sportswear manufacturer’s suppliers, as well as property.
The scheme could be worth as much as 250 million euros a year. It was brought to light by Adidas employees in China in a letter which they did not simply send to management. The document was in fact visible on the social media platform Xiaohongshu, an Instagram-style platform, before disappearing from view on Sunday.
For investors, this has come as a shock (Adidas shares fell by 2.58 per cent on Monday on the Frankfurt Stock Exchange). Admittedly, they had come to terms with the fact that China would no longer be the El Dorado it once was for major Western sportswear manufacturers – starting with Nike and Adidas. But they had been reassured by encouraging first-quarter results. From January to the end of March, Adidas’s turnover in China accounted for nearly 16.5 per cent of the group’s total revenue. Boosted by online and wholesale sales, it rose by 8 per cent (compared with the same period in 2023) to €897 million.
Adidas entered the Chinese market in 1997. Although no one doubts the market’s enormous long-term potential, it has nevertheless become one of the most challenging in the world for major sportswear manufacturers. Like most major European and American ready-to-wear brands, Adidas was boycotted by Beijing in 2021 following its decision to stop using cotton from Xinjiang (the province where the Uyghurs live). H&M, for example, was banned from Alibaba’s e-commerce sites for months.
Nature abhors a vacuum
At the end of 2021, Adidas acknowledged that it was ‘still severely affected by the challenging market environment’ in China. The situation did not improve in 2022, due to the ‘zero-Covid’ health restrictions policy being implemented by the Chinese government at the time.
It is now time to show our claws. As nature abhors a vacuum, the gap left behind was quickly filled by others. Starting with Chinese brands, which are determined to make a name for themselves in the world of sport. Beginning in China, before establishing themselves beyond its borders. In the first half of 2022, the Chinese firm Anta Sports thus dethroned the two heavyweights, Adidas and Nike, in the Middle Kingdom, thanks to a turnover of 3.8 billion dollars. It, too, is suffering from a difficult consumer climate in China. But the sportswear manufacturer, now the owner of Salomon, Fila and Descente, is enjoying huge success with these specialist brands.
Close to its consumers, Anta is able to respond quickly – thanks in particular to its network of Chinese manufacturers – in a way that multinationals cannot. Its rival Li Ning (named after the gymnast who won six medals at the 1984 Los Angeles Olympics and founded the company in 1990) is in far poorer shape. However, it caused a stir in 2022 by achieving the biggest rise in the ranking of China’s 100 most valuable brands, according to Kantar.
Adapting your strategy
“Chinese brands (led by Anta, but also including Li Ning, Xtep and 361 Degrees) have captured huge market shares, which they are not about to lose,” warns Sandrine Zerbib, chair of Baozun Brand Management, a subsidiary of Baozun, a Chinese company listed on the Hong Kong Stock Exchange and Nasdaq, specialising in e-commerce. “International generalist leaders such as Nike and Adidas have lost ground in the long term, particularly as other newcomers (On, Hoka, etc.) are appealing to Chinese consumers with their innovative and evolving designs.” According to her, the corruption scandal rocking Adidas in China will cause a great deal of internal confusion, but it will not have a direct impact on sales.
The inventor of the Stan Smith knows he has made his fortune in China. But he has already begun to adapt his strategy to the specific characteristics of this market – in terms of product development, design and manufacturing – in order to get them on the shelves as quickly as possible. Faced with increasingly fierce competition, Adidas is doing its utmost to be more responsive, if only when it comes to restocking its collections. To better meet the expectations of Chinese consumers, it will also need to make greater use of customer data and fashion trends – on the high street, in stadiums and, increasingly, on social media.