The big international sportswear brands Nike, Adidas and Puma, besides the rivalry between them, now have one thing in common which consists of a new business model: all 3 brands are trying to eliminate the middleman sales.
Last week, Adidas unveiled a grandiose four-year plan titled “Own the game”, which consists of a change, DTC-oriented business model.
The term DTC refers to direct-to-consumer sales, whether through a company’s retail stores, factory outlets or digital channels.
Following this new strategy, Adidas aims for this new direct-to-consumer business to account for at least half of its total sales by 2025 and also expects it to contribute more than 80% to the revenue growth achieved so far by the company.
In an official statement from the company, “consumers will expect to receive a brand and shopping experience tailored to their preferences, with personalized offers across digital and physical spaces,” explaining that the new business will be planned and built around consumer adoption, a strategy that has seen strong growth in recent years. Between now and 2025, Adidas aims to increase its membership by a factor of 3 to around 500 million, while simultaneously increasing its e-commerce sales by a factor of 2, with values of $10 billion.
While the direct-to-consumer business model has the potential to increase profits and revenue growth, it also presents a number of new challenges, notes Adidas CFO Harm Ohlmeyer in a presentation of the company and its strategy. This strategy involves sending individual packages to consumers, managing returns and making the most of customers’ intentions. An effective DTC business requires a large investment in marketing.
After reviewing the chart beside, we realize that the largest sportswear brand companies are following the same path when it comes to direct-to-consumer sales. DTC sales show a figure of 41% of total sales in 2020. It also shows Adidas ahead of competitor Nike in the lead with 35% of sales in 2020.
It should be noted that Nike’s fiscal year ended on May 31, which translates the positive impact the pandemic had on DTC sales not being accounted for in its total Nike-related results.