Losing Yeezy is not the biggest crisis for Adidas

Don't worry, just find the time machine first.

If time could turn back, Adidas would have to cover Kanye West's mouth.

After losing Yeezy, Adidas seemed to be equipped with a magnifying glass, revealing the decline.

It has been unsatisfactory recently and urgently needs to find the next pair of Yeezys.

Whether to sell or donate, Yeezy doesn’t know where to go

In October last year, because of Kanye West's anti-Semitic remarks, Adidas and Kanye parted ways, and Yeezy stopped selling immediately.

There is no need to say how important Yeezy is to Adidas.

As of October 2022, Yeezy generated US$1.2 billion in sales that year ; throughout 2021, Yeezy's sales were nearly US$1.7 billion, accounting for 8% of Adidas' total sales.

Seeing him getting up from Zhulou, seeing him entertaining guests, seeing his building collapse.

Now that millions of pairs of Yeezys are in their hands, Adidas is in a dilemma.

CEO Bjørn Gulden (Bjørn Gulden), who took office on January 1 this year, said that the company is studying various plans to deal with Yeezy inventory, which may be destroyed or sold. In short, there is no certainty .

Because neither is the best solution. If it is burned, it will pollute the environment and cause a loss of more than 500 million U.S. dollars ; if it is sold, it may damage Adidas' brand reputation, although part of the proceeds will be donated to charitable organizations ; They sell.

In fact, Adidas owns the copyright and design of Yeezy, but it can no longer use the name of Yeezy, and can continue to sell Yeezy without Kanye's signboard.

But a slap can't be enough, if you want to sell it, it depends on whether the fans buy it or not.

For many sneaker "fundamentalists", Yeezy, which has lost Kanye's aura, is just an ordinary model, and there is no soul without hype .

And uninvolved bystanders believe that Yeezy has become obsolete because of Kanye's remarks:

Kanye gives the shoe a bad connotation, people just don't want to wear Yeezys because they don't want to be judged on the street.

Yeezy, which was originally a bonanza, has now become a volcano. Gulden, who has just taken over the responsibility for 3 months, said bluntly:

It's a very complicated thing and one of the toughest decisions I've ever been a part of.

With unprecedented hesitation, on March 8, Adidas released its 2022 financial report . As expected, the numbers are not good: sales were 22.511 billion euros, a year-on-year increase of 6%; operating profit was 669 million euros, a year-on-year decrease of 66%.

It is worth mentioning that the "2023 Outlook" section pointed out that if the Yeezy inventory cannot be dealt with, the operating profit will be reduced by an additional 500 million euros, plus other costs, and the estimated loss in 2023 is 700 million euros.

▲ Bjørn Gulden is also the former Puma CEO.

2023 may be a fruitless year. But Gulden put it in a nicer way, seeing 2023 as a "transition year" responsible for laying the groundwork for 2024 and 2025.

He also bluntly stated that the Yeezy business is "now lost" and needs to be replaced with "many, many things."

There is no other Yeezy business on the market, the closest is Jordan.

So, what can the huge Adidas rely on to win back the market?

Betting on classic models, retro is the antidote?

For Gulden, the answer could be adidas' classic sneaker.

He likes Adidas' Terrace line, which includes styles like the Samba, Gazelle and Spezial.

Terrace originally meant an open-air platform and a ladder stand, and as a fashionable Terrace, it originated in the late 1970s. It refers to the dressing style of fans watching games on the terrace of a football stadium, accompanied by the British football boom and youth pop culture Along with it, Adidas is one of the most popular footwear brands out there.

It is conceivable how long these shoes have been. Samba was born in 1949, Gazelle appeared in the 1960s, and Spezial came out in the late 1970s. It is suitable for football, handball and other sports, and it can still be bought on the Adidas official website.

Limited by the sneaker technology in the early years, their appearance is not too different, and the style is relatively simple, but it is also classic and timeless.

Now, adidas is hoping for a "comeback" with their popularity, especially the Samba :

We have probably the hottest shoe on the market right now, and in the Terrace segment, it's the Samba, which shows up on the runways and on celebrities. It is hot in Asia, Europe and America.

Youtuber fashion blogger Bryce Moore believes that Samba may be the successor of New Balance 550 or Nike Dunk. Because it just hit the current retro resurgence, as one of the retro items in the 90s, it was favored by Generation Z consumers.

From March 7th to 10th, Adidas also launched a pop-up store dedicated to selling Samba in Shanghai. It was overcrowded from the opening of the number at 10 am.

In addition, in 2022, Adidas and Gucci will launch their first joint series, in which Gazelle, the core style of footwear, will also design several new color schemes. This series is to extract and combinethe elements of the two brands in the 1960s and 1980s , and the retro aesthetics are integrated.

The Terrace series is indeed classic, but it is hard not to say that it is fried rice, and cold rice with good appearance is also cold rice.

In addition, Adidas is still "extensively reviewing" its business , which seems to mean digging gold in existing products.

We need to put the pieces back together to make Adidas shine again, but we need some time.

But according to senior analyst Tom Nikic, this is precisely a major problem for Adidas :

"Adidas is struggling to find the next big thing like Yeezy" is more like "clearing the decks."

Internal and external difficulties, the second in the world has more problems

Nike ranks firmly as the world's largest sportswear brand , while Adidas, the world's second largest, appears to be in danger.

In 2022, the market value of Adidas will be surpassed by lululemon and Anta one after another.

Especially in the Chinese market, Adidas has been poor in recent years. As of August last year, Adidas Greater China's revenue has declined for five consecutive quarters ; the 2022 financial report even shows that Greater China's revenue has dropped by 36% from the previous year .

Before this, China was the market with the highest profit margin in Adidas history , but now it has become the most unpalatable one.

In addition to the "eating and smashing" cotton incident, frequent inventory squeezes and discounts have also plagued Adidas.

A clerk interviewed by "Tiger Sniff" recalled that in 2020, the store where he worked began to discount frequently, and "the regular price generally does not last for two months."

A dealer close to "Shijie" also said that starting from 2021, Adidas has become disorganized in promotional rebates. Not only is the discount cycle long and the discounts are large, but the range of products covered is also very confusing.

Discounting is a phenomenon, and it is also the most direct way to increase sales. It actually points to the problem of inventory backlog.

No problem is isolated, and there are many causes behind excess inventory.

One of the more prominent points is that Adidas has been slow in product innovation in recent years.

The Yeezy series was launched in 2015, and on Double Eleven 6 years later, half of the Adidas e-commerce sales were still contributed by a certain Yeezy, which shows that there have been almost no new explosions in recent years.

The products cannot be sold in China, partly because the design is not localized enough. In August last year, Adidas former CEO Kasper Rorsted accepted an exclusive interview with the German "Business Daily", which said:

We don't understand consumers well enough, so we leave room for Chinese competitors who do a better job. Today's Chinese consumers like products with a Chinese feel.

Let's talk about frequent discounts, it is a means of improving performance and saving inventory, and it is the beginning of a vicious circle——

It not only affects normal sales, but also damages brand tonality and consumer perception. If there is no discount, the product will not be sold, and the brand will further lose its ability to control the market. It may also affect the development of new products.

Adidas is not unaware of the "lesion" that has become a knot. In 2019, Simon Peel, global media director, pointed out that Adidas sacrificed brand building because it focused too much on return on investment and focused on short-term efficiency and benefits.

Even the current CEO Gulden has repeatedly emphasized :

We need less stock and discounts… adidas has all the ingredients to be successful. But we need to refocus on our core: products, consumers, retail partners and athletes.

Bernstein analyst Aneesha Sherman believes that Adidas is facing a bigger problem than losing Yeezy and will continue to suffer from declining sales.

In her view, Adidas relies too much on celebrities, and Kanye West, who has already cut seats, gave it a blow. In China, it is impossible for Adidas to follow the path of letting celebrities become spokespersons.

From this point of view, Yeezy, which has hit Adidas hard, just tore off the fig leaf, and the bottom is full of loopholes.

Adidas' influence still exists, but an undeniable fact is that if you sail against the current, if you don't advance, you will retreat.

It is as beneficial as autumn frost, and it can eliminate evil disasters. Work email: [email protected]

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