In an exclusive interview with CNBC International held on August 9, Adidas CEO Kasper Rorsted reported a 35% drop in revenue for its Greater China market. Rorstedt acknowledged that Adidas made mistakes in China, saying “We don’t understand consumers well enough, so we left room for Chinese competitors who are better off.”
Greater China was once a gold mine for the German sportswear giant. In fact, by the end of the 2019 fiscal year, Adidas had achieved 23 consecutive quarters of double-digit sales growth in the Greater China market. However, from fiscal year 2020 onward, the rippling effects of the Xinjiang cotton controversy and the pandemic caused Adidas’ performance and popularity to dim over time.
Rorsted blamed the decline in Adidas’s revenue on the “challenging market environment” in which pandemic restrictions led to nonstop supply chain disruptions. The sportswear brand’s revenue has certainly taken a hefty blow, especially considering the fact that Adidas’ business in China accounted for 20% of the company’s sales last year.
Apart from pandemic-related factors, Rorsted believes Adidas went wrong in their approach to an evolving Chinese market without catering to their taste. According to Rorsted, “today’s Chinese consumers like [products] with a ‘Chinese feel’.” Indeed, consumer demand has matured to a point that brands can no longer rely on foreign allure alone to make waves in China’s market. Therefore, brands must find innovative ways to stand out in an interesting way through quality or tapping into domestic trends.
Previously, Chinese netizens expressed their dissatisfaction with the brand, claiming that Adidas is overpriced and that the quality is worse compared to a decade ago. Simply put, the new products have not been interesting or relatable enough to attract customers, which has led to withering consumer attention and sales. Chinese consumers today would rather spend money on quality and style rather than on a logo or status symbol.
Despite the current downward trend, Adidas’ CEO does not believe that China will abandon Western brands altogether. On the contrary, Rorsted remains strong in his conviction that the Chinese market will bounce back and perhaps even grow once the market has stabilised.
While there is no telling where Adidas will be five years from now, one thing is for certain: attention to quality and domestic trends is at the forefront of China’s rising market.