Adidas Once Experienced Huge Inventory
Keep on double-digit increase, where is Adidas’ strength?
Colin Currie’s confidence comes from Adidas’ great expansion in China in the year of 2011.
In 2011, Adidas opened around 1000 new outlets in great China area and half of them were opened in Chinese small and medium-sized cities. The significance lies in that in China sporting goods market, the number of new outlets often equals to the company’s new achievements. The process of China’s urbanization and modernization will make consumers’ purchasing power continue to increase, which will provide foundation for Adidas’ double-digit growth achievements.
According to Adidas’ development plan from 2010 to 2015, the total amount of 2500 new stores will be opened in great China area in the recent five years and at the same time the income should be maintained with double-digit annul growth.
On the basis of the data issued by Adidas, the great China’s region’s total revenue was 900 million Euros which gained 28% year-on-year sales increase from January to September in 2011, and its various brand all achieved double-digit sales increase. It is unquestionable that the newly added stores’ accomplishments are earthshaking.
Is it too optimistic? Colin Currie told the reporter that he does agree with the view that with the development of China’s urbanization and modernization, consumers’ purchasing power will continue to increase, which will provide foundation for Adidas’ double-digit sales growth.
Ma Gang thinks that although they possess sufficient power, Adidas New Year’s target of gaining double-digit income growth is still overly optimistic. He asked: “Adidas opened about 1000 new outlets this year, and could we open so many outlets next year? Another problem is what about Adidas new outlets’ profitability on earth”.
Previously, in order to maintain outstanding achievements’ continuous growth, China local sporting enterprises strongly asked dealers to order as much products as possible. After distributors got these goods, the quoted companies’ revenue digit was pretty eye-catching, however in fact, these goods were in distributors’ storages and became overstock.
This is the reason in the year 2009, Adidas got into trouble, and that year, high inventory businesses had to dispose them with large discounts, which resulted in earnings negative growth.
Colin Currie claimed that Adidas has already learned experiences from the year of 2009, and now we confirm inventory levels with dealers every month. If there are any complications, we will support the dealers to carry out sales promotion in order to make inventory fall into a reasonable level. He said: “my distributors told me that our sales level surpassed other rivals, which signifies that our goods were undoubtedly bought by customers and not lying in the storage”.
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