Adidas’ Keys to Success, How it's Taking On Nike
On a warm summer day it’s hard to go anywhere without seeing someone wearing a pair of Adidas Superstars, Stan Smiths or Boosts. Adidas is synonymous with pop culture but the German brand hasn’t always had this level of dominance. A decade ago Adidas was an afterthought. Nike reigned supreme and many had written Adidas off. Then Adidas launched its Boost midsole technology in its running shoes in 2013. That was a turning point for the brand.
Marathon runner Dennis Kimetto set a world record wearing Boosts in 2014. Then in 2015 Kanye West was spotted wearing the shoes. Sales took off after that so much so that between 2015 and 2019 when Nike added nearly $6.7 billion in revenues growing at a yearly rate of 6.5% Adidas grew at an even faster rate of 11.3% adding $7 billion in sales during the same period. While Nike’s sales at $39 billion are well above Adidas’ at $24 billion no one can deny that Adidas is having its moment. But to understand how Adidas got here consider these seven keys to Adidas’ success.
1. Innovation. What’s looks simple and comfortable, like a pair of lululemon pants can be backed by a level of innovation that is more than meets the eye. Adidas Boost sneakers contain a comfortable, squishy midsole that absorbs and returns more energy to the person wearing them helping athletes like marathon runners to keep on going. “The thing about Boost is that the minute you put it on, you know it’s a completely different experience than anything else out there” says Andy Barr, Adidas Director of Global Creation.
2. Differentiation. The first Adidas Boost sneaker also differentiated itself by looking different than the sneakers that were popular at the time. A casual and stylish look that is mainstream now. “It’s easy to forget that in 2013, most running shoes didn’t look like [the Ultra Boost] said Barr. That paring of innovation plus style really helped to elevate Adidas.
3. The right collaborations. Collabs are the name of the game in the sneaker world, think about Nike’s rise to fame fuelled by its deal with Michael Jordan. Adidas correctly saw the potential in partnering with Kanye West and gave him the deal Nike wouldn’t. Speaking about the Air Yeezy, Kanye West said: “it was the first shoe to have the same level of impact as an Air Jordan, and I wanted to do more.” Not only did he get to do more, Adidas paid West more in his new deal with Adidas. West negotiated an unheard-of deal: a 15% royalty on wholesale and a marketing fee. It is estimated that Michael Jordan’s deal involves a 5% royalty. That collaboration has paid dividends, creating the $1.5 billion Yeezy brand and in the process making Adidas relevant again.
4. Thinking outside of the box. Envisioning its brand as broader than just the athletes that wear it but as a cultural icon helped Adidas cement its status in the athletic apparel market. One of the things that often keeps a business from reaching its full potential is staying within a niche segment for too long, negating any cross over potential. Adidas’ collaborations with the likes of Alexander Wang, Stella McCartney and Prada demonstrate that Adidas sees itself as catering to a wide range of consumers, from athletes to trendsetters.
5. Scarcity. Adidas, more than almost any brand, understands how vital scarcity is to building and sustaining a brand. When West launched the Yeezy Boost 350 with Adidas he did so with a limited release drop. It is estimated that for many of West’s limited release drops only tens of thousands of shoes are available for sale which then sell out almost immediately. Author Robert Cialdini has written extensively about the scarcity principle. His teachings can be boiled down to the simple fact that: “people want more of those things they can have less of.”
Even Adidas CEO Kasper Rørsted confirmed what the brand’s secret sauce is when he said: “as we’re moving new Yeezy products into the market, we will do what we’ve done also in the past: create scarcity around the new products we are launching, make sure we have the hype, and, over a given period of time of course, drive volume into that market.”
But Adidas has suffered at times by moving away from its own strategy. "They put too many pairs [of Yeezys] in the market and nearly killed it off" said Matt Powell, Sports Industry Analyst for NPD Group. "It's kind of a conundrum. You have a shoe that is popular. People want it, but if it becomes widely available, they kind of lose interest."
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6. Recognizing the influence entertainers have, especially hip hop entertainers, have on sneaker culture and sales. Back in the 80s before it was cool to do so Adidas gave Run-DMC a million dollar endorsement deal. "Today, some of the biggest shoe releases are from entertainers" says Peter Verry, Senior Athletic and Outdoor Footwear Editor at Footwear News. "Look at Kanye West". "He can tour 365 days a year. He can be relevant in the fall, he can be relevant in the summer, he can be relevant in the spring or the winter. There's just much more opportunity for someone who's always in the limelight to just come out and engage with his or her fan base." said Verry. Adidas’ deal with Beyonce will also help Adidas to reach a broader base of consumers especially those that wear athleisure.
7. Spotting trends early. While sneakers are worn everywhere today from brunch to the boardroom that was not the case a decade ago. As our lifestyles became more casual Adidas has been there the entire time catering to and defining the trend of more casual attire. Adidas has not just followed this trend but has been a principal contributor with consumers trading their dress shoes in for a pair of Superstars.
“Demand for technical, performance shoes began to subside, and consumers started caring more about fashion" said Christopher Svezia, an Analyst at Wedbush Securities. "Adidas was very aggressive. They took off the reins and really went at it." Speaking about when the Ultra Boost first came out, Barr said: “we knew we had to do something completely different to what everyone else was doing.” “No one was wearing running shoes casually at the time, either.”