Adidas wants to reduce its product range by about one-quarter as a means to cut costs and improve its stock turnaround, said Herbert Hainer, chief executive of the Adidas Group, in an interview published a few days ago in the Frankfurter Allgemeine Zeitung (FAZ).
Hainer said that the group was selling nearly 47,000 different products, but it was making about 80 percent of its turnover with 20 percent of its total assortment. It would have to be rationalized, he said, partly to make up for the launch of fresh new ranges such as the Neo label.
The company will eliminate products that yield too small a margin to justify the logistical costs, while at the same time enlarging the group of products being sold on a global basis. This is meant to generate more cost synergies and to simplify logistics. The global range will comprise hundreds of items as of next year, and their number should reach the thousands by 2015 at the latest.
Hainer also told FAZ that the Adidas Group was cutting costs and shortening lead times with the introduction of a “virtual sell-in” system, giving clients the opportunity to view products on 3D screens and order them online, with only a few samples available in the company's 150 showrooms. He said that the process had been well accepted when it was launched in France at the end of last year. It was started in North America earlier this year and will soon be rolled out to other European countries, with Asia to follow.
The move, which is due to be completed worldwide within the next 18 months, could yield significant cost reductions worth a double-digit-million figure in terms of euros. Virtual sell-in should represent about 40 percent of the company's sales this year, and 60 percent next year.
At the same time, Hainer said that he wanted to simplify the group's discount system, which is currently based on many different factors, from volume to performance, customer loyalty and many more considerations. The new system is set to use three different types of rebates, mostly based on growth and performance, in order to stimulate sell-through more strongly.
