The Adidas Group wants to get more creative talent involved in its product development, to invest over-proportionally in key cities and to speed up its production, in order to get closer to consumers. The initiatives form the three pillars of Creating the New, the strategic five-year plan unveiled by Adidas last year, and further details were provided at an investor tutorial in Herzogenaurach earlier this month.
James Carnes, vice president of brand strategy creation, explained that Adidas wanted to increasingly invite creatives and other stakeholders to engage with product creation. This new “Open Source” policy has already supported the Adidas brand's broad partnerships with Kanye West and Parley for the Oceans.
The group is preparing to open its “Creator Farm” in Brooklyn later this year, and the plans also call for the opening of “Maker Labs” where plenty of materials are put at the disposal of creators to tinker with. Creative partners will get access to some of the group's archives, materials, factories and data.
Carnes admitted that the strategy may be a little risky, because the group sometimes moves ahead without knowing what the outcome of the projects will be. It also can start announcing some of the products before it actually has the production capacity in place. However, Carnes added that these initiatives yielded great levels of exposure and engagement. Prototypes of footwear designed with Parley for the Oceans and 3D printing techniques yielded coverage that amounted to €25 million in media value.
The second leg of the strategy calls for sales to double in six key cities by 2020 – Paris, London, New York, Los Angeles, Shanghai and Tokyo. The over-proportional investments relate to research into consumer habits, investigating each neighborhood; organizing grassroots activities to increase community engagement; and investing in retail exposure in a way that is consistent with the specific consumer habits in each of the city's areas.
Christopher Williams, vice president of commercial planning and development, pointed to the Boost Battle Run in Paris as an example of such local engagement. The competition is driven by influencers in ten different districts, so that the participants compete with Pigalle or Bastille rather than Adidas. Launched two years ago, the project currently boasts 23,000 active runners. Williams added that about 33 percent have converted from another shoe brand to Adidas.
And then there is the plan to be more in sync with consumer demand through faster production. Franck Denglos, vice president of Speed, explained that this included planned responsiveness, a program to quickly reproduce items in high demand; in-season creation, allowing the group to rapidly capture trends and put out corresponding products; and a broader never-out-of-stock program, to make sure the most iconic products are always available.
These projects should significantly reduce the risk of over-buying and thus help Adidas to raise profit margins. The group's plans call for about half of the turnover to come from “speed-enabled” products by 2020, and its share of full-price sales across these speed ranges is projected to increase by 20 percent over the next five years.
Tying in with all these projects are the speed factories that should be operational in Germany and the U.S. next year. As previously reported, these plants are meant to be almost entirely automated, making use of the latest robotics. The German plant was opened as a pilot with several partners in Ansbach last year, and large-scale production has been set for mid-2017, to be operated by Oechsler Motion, a strategic partner for Adidas. The U.S. plant should open around the end of next year, adding up to a capacity of about 1 million pairs.
While the Adidas group started outsourcing its production to mostly Asian manufacturers several decades ago, the latest technology enables it to have efficient production closer to some of its largest consumer markets and to make more personalized products – albeit on a small scale compared with the group's annual production.
