A few years ago, China was a promising market for Adidas because the country’s middle class was growing and the margins for Adidas were particularly strong. The brand with the three stripes was one of the most popular Western brands in China. As early as 2008, Adidas opened its (then) world’s largest flagship store in Beijing, and many others followed in several multi-million cities across the country. But then one crisis followed after another: First the Xinjiang controversy, then Covid and its lockdowns. In 2022, Adidas’ sales fell by more than a third in the People’s Republic. In March 2022, the company reacted. Jason Thomas had to go back to Dubai, where he was already active for the company until 2017, and Adrian Siu became the new managing director for Adidas Greater China.
When Adidas’ problems in the country began as a result of the Xinjiang/cotton/forced labor debate, the Chinese consumers had increasingly turned toward domestic brands such as Li Ning or Anta Sports. This is when the “guochao” phenomenon started playing an increasingly important role in marketing in China: Interest in Chinese culture, tradition and brands. Younger Chinese customers, in particular, were increasingly buying products that are made in China or had Chinese characteristics. Siu, in an interview with the Financial Times, said this consumer patriotism is the new starting point for Adidas to regain China’s people’s favor.
The sporting goods manufacturer plans to put a greater focus on the Chinese local context, working more with Chinese ambassadors and offering product lines designed specifically for the People’s Republic, combining international design with traditional culture. To this end, the company plans to design and produce an increasing amount of products directly in the country. Siu told the Financial Times that he wants to have at least 30 percent of the clothing sold in China also designed in China by next year. Before the crisis, the share had been in the low single-digit percent range. However, production in China could drive up prices, as labor costs are higher than in Vietnam, Indonesia or Cambodia.
The plan has the potential to solve at least one of the bigger issues weighing on the bottom line after the decline in consumer spending in the Western world due to the Ukraine war, rising energy costs and inflation, as well as the costly end to the co-op with Kanye West. Whether the strategy can work out remains to be seen. In the meantime, competition from Chinese apparel brands is growing even stronger. The road could be rocky.
