Adidas is shaking up its retail strategy in China.  After years positioning itself as a top sports brand, adidias is widening the adidas brand in China beyond shoes and sweats. The new retail strategy will have individual stores focus on specific niches ranging from basketball and other athletic apparel to teen and casual wear.  No more "one size fits all" with each store trying to stock everything.

Think of it as specialized shops offering specialized products to attract the right audience interested in what is in the store.  

Challenges to correctly manage 

• Store branding will be key so consumers are not confused or disappointed by going to the wrong store.  
• The stores should be seamlessly integrated so a customer can be led from one store to the one carrying what they are looking for.  I.e. if someone interested in basketball gear walks into a store focused on fashion, what happens?  Will a customer take the time to go to the other store if far away?
  
• Consider dominating real estate by crowding out competitors.  Think of Starbucks being across the street from each other.
• How to determine which stores (and franchisees) focus on which niche?
• Marketing will be key to making sure consumers understand what the adidas brand stands for as the brand will be split at the retail level.

Implement first in company-owned stores, then roll out to franchise stores

To persuade China franchisees to adopt the new niches, adidas is first making changes in its company-owned stores.  Leading by example is smart.  adidas is then in a position to show the results to franchise owners.

However, before it can really roll out nationwide across China where adidas has about 7,000 stores, 90% which are franchisees, adidas must, and is, tightening control over inventory management. adidas is analyzing sales data of  franchise partners and overseeing ordering.

Test, prove, expand

Adidas tested this new retail strategy in China's central city of Wuhan.  It took 5 identical adidas stores and split them up to focus on different crowds: e.g. basketball players, fashion, etc.  The results were promising.  Sales at the revamped  stores jumped 80% in 2012 compared with a year earlier.

Source: "Adidas Sportswear Is Hot on Nike's Heels in China", Wall Street Journal, March 7, 2013.
http://online.wsj.com/article/SB10001424127887324034804578345741263753994.html?mod=ITP_businessandfinance_0

CKB Solutions is all about real solutions for the real world.  To learn how we can help your business, contact Greg Kovacic in Hong Kong.

Before the ubiquity of smartphones, retailers had the advantage over consumers.  It was nearly impossible for consumers to compare prices in real time between offline and online retail channels.  The smartphone leveled the playing field for consumers.  Not surprisingly, prices are being leveled in the process.  All else being equal, consumers want to pay less than more.   Duh! Consumers, with the new found power in the palm of their hands, understandably took to showrooming to make sure they were getting the best price/deal. 

Showrooming is when a consumer checks out a product in a physical store then goes online to make the purchase.  Showrooming impacts some retailers more than others.  E.g. Customers showroom electronics more than any other product category.

Where digital is integrated in the real world, there is only going to be one price (adjusted for shipping and handling, warranty, etc) for both offline and online retail channels.  Retailers would be wise to use their pricing strategy to encourage consumers to visit their physical store, their online store, or both, and purchase via whichever makes them most comfortable.  With pricing leveled, retail success will be driven by service and selection.

Best Buy recently launched a new initiative "to price match the current pre-tax price for new, identical, immediately available products from local retail competitors and select designated major online retailers at the time of purchase only. (No subsequent price matching of competitors is allowed).  If Best Buy lowers a price on a product (online or in-store) we will allow price-matching up to 15 days following the original purchase."

With pricing leveled, Best Buy will have to compete on service and selection.  

Must Haves for Customer Service Differentiation:

• Seamless integration between offline and online
  
• Knowledgeable and supportive retail experience whether offline or online with no forced upselling
• Ability to purchase online in-store if out of stock in-store
  
• Do the homework for consumers and make it easy for consumers to self-educate themselves on why your price is  the best value for the product including delivery and warranty

Must Haves For Product Selection Differentiation:

• Exclusivity, even if only for a lead period
• If a mass market retailer, wide selection across styles and price points
• If a niche market retailer, unique selection at price points relevant to target consumers
• Latest models

Source: "Best Buy Says It Has Killed 'Showrooming' For Good", Business Insider, February 18, 2013
http://www.businessinsider.com/best-buy-new-price-matching-policy-2013-2

CKB Solutions is all about real solutions for the real world.  To learn how we can help your business, contact Greg Kovacic in Hong Kong.