Athletics, kabaddi and wrestling are increasingly finding new fans in the subcontinent. While cricket continues to dominate, attracting huge investment, other sports are getting growing attention from broadcasters and private investors.
Till recently, Adidas faced slow revenue growth and dismal profit margin. It is now looking beyond cricket. “Hima is an inspiration for Indians across generations, especially next generations, who will take up sports and stay involved,” said Dave Thomas, managing director, Adidas India. The company is aiming at youth for future growth. “Associations with cricketers let us tell interesting stories. Now is the time to bring more stories, Indian stories, to the fore.”
There are, presumably, other benefits in getting Das. The company's sales are skewed in favour of male sportswear. “We are not happy with sales of the women’s portfolio,” said Thomas, without specifying its share in their India business.
Despite a prominent presence in large markets such as Mumbai, Chennai, Delhi and Bengaluru, sales growth at Adidas remained in either low single-digit or low double-digit between 2012-13 and 2015-16. The net profit margin remained between only 1.88 per cent to 4.78 per cent.
However, that was also the period when the seed of a turnaround was sown. Initial market visits by Thomas after he took charge in late-2014 led him to some missing pieces of their India puzzle.
“It became evident that while earlier smaller stores were selling products and were considered low risk propositions by Indian partners, it was a drag on our business. So, we decided to shut down many of the smaller stores and replace these with larger ones. Today, larger stores, with wide ranges and separate product sections, offering a world-class buying experience, are lifting our business. People stay longer in these stores, the chances of conversion go up and so is the average ticket size,” said Thomas.
Adidas has also parted ways with many local partners who were not aligned with the new plan. "Today, we have fewer franchise partners but they are aligned with this idea,” says Thomas. Despite flat growth in store count, the weeding has resulted in bigger store space. Today, Adidas has 450 outlets in 180 cities; for its Reebok stores, the number is 220. In some cases, a simple change in franchise partners had resulted in improved sales. “For example, sales have tripled in Goa. It is also ramping up the multi-brand retail play now, a channel that was ignored,” says Thomas.
In 2016-17, Adidas India’s net sales grew 25 per cent over a year before, to Rs 10.7 billion from Rs 8.5 billion. Net profit jumped 130 per cent to Rs 934 million. Reebok, its crown jewel, turned profitable. It posted Rs 190 million of net profit in 2016-17, compared to Rs 360 million and Rs 570 million in net loss during the previous two years, respectively.
The best is yet to come, promises Thomas. Sales and profit have grown in 2018 and he says 2019 will be their best in the recent history of Adidas India. “We will grow by healthy double-digits next year,” he says. With stores in place and no new macro policy change in the horizon, Adidas says it will unleash ranges of global and customised products. “We will have big ramp-ups and launches in 2019. The aim is to convert popularity into purchases.”