Adidas Targets Teenage Girls for $1.3 Billion in Sales
Adidas AG (ADS) already dominates the global soccer market. Now the company is targeting teenage girls more influenced by music and fashion than sports.
By expanding its NEO fashion outlets, which offer such looks as metallic leather boots, and by exploiting social-media platforms including Facebook and Twitter, the world’s second- largest sporting-goods maker hopes to attract 14 to 19 year-old girls. The company estimates the effort may bring in an additional 1 billion euros ($1.3 billion) in revenue by 2015.
“Teenage girls are a target group we didn’t really reach so far, whereas boys are closer connected to Adidas via sports,” said Erich Stamminger, the board member responsible for global brands. “For girls, you need a bit more of fashion influence and that’s exactly what we are offering with NEO.”
The three-year-old NEO fashion chain has made inroads in Russia, India and especially China, where it has 1,000 stores. With the opening in Hamburg this month of the first of 10 stores planned in Germany, Adidas is pushing into the more crowded and more competitive fashion market in western Europe, where Inditex SA and Hennes & Mauritz AB are already firmly established.
NEO, with 26 outlets in Russia, 60 in India and products for sale in such U.S. department stores as Kohl’s Corp., J.C. Penney Co. and Brown Shoe Co.’s Famous Footwear chain, generated sales of about 400 million euros in 2010 and 500 million euros last year, according to estimates by Mark Josefson, an analyst at Silvia Quandt Research GmbH.
Adidas has forecast group revenue of 17 billion euros by 2015, with growth being driven by expansion in China and Russia.
Cracking the teenage fashion market won’t be simple. Hennes & Mauritz, (HMB) the world’s second-largest clothing retailer behind Inditex, reported a fifth consecutive drop in quarterly profit on Jan. 26 as it stepped up discounting amid a lull in consumer spending. H&M plans to open 275 stores this year, while Inditex is adding Zara outlets and expanding its e-commerce range.
“Adidas has the experience from the retail side, but the brand has to differentiate itself because it’s a very competitive environment,” said Thomas Effler, an analyst at WestLB AG in Frankfurt. “Social media can be a way for Adidas to differentiate itself.”
To interact with teenagers, NEO is developing social-media channels on platforms such as Facebook and Twitter. A mirror inside the Hamburg store allows customers to take photos of themselves in outfits and to post them online. The brand is putting Twitter feeds into stores allowing managers to share information, said Claire Midwood, who heads the NEO label.
Liked on Facebook
“Our consumers’ lifestyle is in digital media, that’s why we need to be there as well,” Midwood said. “Not only will we develop digital applications and experiences for our consumer to use out of store, but we will also introduce new digital innovations at retail.”
More than 12 million Facebook users said they like the page created for Adidas Originals, part of the Adidas Sport Style unit that includes NEO, which accounts for more than 20 percent of group sales. That’s more than for any other company in Germany’s benchmark DAX Index and also more than the 6 million Facebook users who said they like the Nike Inc. (NKE) page.
“It’s all about creating hype and buzz around the brand,” said Matt Powell, an analyst for Charlotte, North Carolina-based SportsOneSource “Social media is very important for this generation, even more so than broadcast media. Social media is the primary source of communications for teenagers and it’s exactly the appropriate approach for today’s consumer.”
The NEO store in Hamburg is “definitely worth a visit,” Jana Vandamme wrote on the chain’s Facebook page, which is liked by more than 190,000 users. “Music, fabulous clothes and cool people.”
Nike, the world’s biggest sporting-goods maker, has shied away from fashion clothes. The Nike brand generates 30 percent of revenue from apparel and the majority of those sales come from sweatshirts, t-shirts and athletic pants. While the company’s Hurley and Converse brands do offer more fashion- oriented clothes to teenagers and young adults, their combined sales make up 6.6 percent of Nike’s total revenue and Converse, with its Chuck Taylor sneakers, is known for shoes.
The consumer climate in Germany may help Adidas with its fashion push. Consumer confidence in the country will rise for a fifth month in February as unemployment holds at a two-decade low, boosting the economic outlook and households’ willingness to spend, GfK SE said on Jan. 26.
“In western Europe, it’s getting more difficult, but in Germany consumer sentiment is still OK,” Effler said.
Adidas Chief Executive Officer Herbert Hainer said in November that Europe’s debt crisis won’t halt the company’s growth and forecast higher earnings this year.
NEO, whose prices start at 12.95 euros for t-shirts and 34.95 euros for shoes, is due to open a store in Frankfurt on Feb. 16 after adding one in Dusseldorf last week. The brand has a collection for boys signed by David Beckham, the England soccer star who designed a range of underwear for H&M this year. Adidas is looking at signing a celebrity to help endorse the girls’ collection, Midwood said.
That may help further increase the proportion of female customers, which at about 50 percent is higher than for other Adidas labels, Stamminger said, declining to be more specific.
“Adidas will have to refresh its NEO collection more quickly and more frequently than it refreshes designs for jersey shirts, but it provides an angle for Adidas to compete with brands like H&M and attract teenage girls,” said Silvia Quandt’s Josefson.
To contact the editor responsible for this story: Sara Marley at firstname.lastname@example.org