Nike and Adidas Going for Gold
By Bernice Hurst, Managing Partner, Fine Food Network
Millions of people worldwide have been watching the Olympics these past few days. And watching the athletes attired in competing costumes. According to news reports, Nike and Adidas have spent not millions but billions on making their brands as visible as possible.
Although Britain’s Guardian, for one, describes the competition in terms of capturing what it describes as “the fastest-growing sportswear market in the world,” audiences all over the globe are seeing the iconic trademarks. Competition for visibility was hot. Adidas sponsored the games themselves and the Chinese Olympic committee while Nike sponsored China’s teams in 22 out of 28 sports.
Paul Pi, Adidas China’s vice-president of marketing, said, “If you want to lead globally, you have to lead in China.” Although the market in China is a fraction of the American market, it has been growing at 30 percent annually for the past five years.
Nike’s spokesman, Charlie Brookes, says the American company wants to focus on individual achievement. “For us, it’s about connecting with athletes: we make products that make them perform better and then build on the excitement that creates.” Pointing to the ultralight Hyperdunk shoe for Kobe Bryant and Asafa Powell’s Zoom Aerofly, he added that ordinary consumers benefit from the same technology.
Of course, this week’s devastating failure of Chinese hurdler Liu Xiang demonstrates
the danger of individual endorsements. The star was set to wear Nike shoes
in his races and, presumably, on the victory stand, an Adidas top. Following Liu’s pullout due to an inflammation of his right Achilles’ tendon, Nike quickly responded with a new
ad displaying the athlete’s somber face and the ad copy, “Love sport even
when it breaks your heart.”
Analysts believe the two firms are nearly tied for market share in China at the moment and needed the sponsorships to raise their profiles. Terry Rhoads, of Shanghai-based sports specialists Zou Marketing, estimated China could overtake the U.S. as the biggest single market by 2025 while Greg Paull, co-founder of marketing consultants R3, believes Adidas was threatened by Nike’s deals with individual athletes. Meanwhile, one of China’s own athletes has started a sportswear business that is providing even more competition. Which means that with 400 million under-20s to target, no one yet is in the lead and the eventual positioning on the podium remains to be decided.
Discussion questions: What payback do you expect Nike and Adidas will receive from their marketing investments in the Beijing Olympics? Will it benefit Nike and Adidas in China? What impact will it have on U.S. sales?
China is huge in terms of sportswear potential, just like they have been for US automakers so it is no surprise that Nike and Adidas have used this world showcase to stage major marketing efforts. Just look at what Under Armour has done in the USA with endorsements by athletes of their sportswear, and you can see why China offers the potential for even greater rewards to both US companies. China also covets the made in USA image as status and so Nike and Adidas recognize the potential to keep local competition at bay.
Neither company wants to see an Under Armour effort take hold with Chinese consumers via huge Chinese athlete endorsements, so they bank on their “world image” to keep their elite profile with shoppers in that market.
The constant brand reminders should benefit Nike and Adidas around the world. When consumers see the athletes dressed in Nike/Adidas clothes and wearing Nike/Adidas shoes, positive feelings for the brand result.
One brand not mentioned in the article, yet the one getting the most coverage is Speedo. It will be interesting to see how they benefit from all of world records set in swimming.
Wow–are there any other brands besides Nike, Adidas and Speedo gaining as much visibility with the Olympics? Certainly not in footwear and apparel (though Ralph Lauren is trying).
Part of what drives sales is endorsements and advertising and all things equal (so at least in theory), the brand with more visibility should do better. Distribution is a similar variable and if there is any question about its impact, just look at the airline industry.
The Olympics–especially this one with its unprecedented amount of coverage AND high ratings–will drive sales for relevant sponsors. Look at WIN detergent (which is a phenomenal product btw). Its sole marketing strategy is a USOC sponsorship. Check out this article in last week’s The Wall Street Journal about WIN.
That massive exposure is nice for both manufacturers is a good plan and yes, China buying power is increasing astronomically, but when it comes down to it, how many of those 400MM under 20+ young adults will be able to afford the sportswear? As you may have noticed by watching the games, move outside the newly modernized downtown Beijing and you see quite a different China.
Crowded, poverty stricken streets lined with people who frankly worry more about their next meal rather than a fancy new pair of shoes.
China is ruled by a very few, and that is where the new disposable income is coming from. But unless each one of those few privileged are planning to spend A LOT, then some of Nike and Adidas sales volume figures might be over exaggerated.
Plus, wait until the Chinese start to see how much it costs to maintain, gas up and insure (do you think they will bother?) all those new cars they are planning to purchase. That will be an eye opener and wallet shrinker.
The market for sports wear is enormous today and will be growing tremendously after the Summer Olympics. Nike and Adidas invested well in the Olympics and gained additional recognition for their wares.
Also watch Speedos surround swimmer’s bodies and note how record holder, sprinter Usain Bolt’s golden shoes will be on shelves everywhere. But keep an eye on that young Chinese entrepreneur’s sports company, bolstered by heavy Chinese demand, will soon rival Nike and Adidas in total sales volume. Sports wear–what a great product arena to be established in right now.
I think when we mention that “very few” people in China have disposable income, we need a little perspective on what very few means when your talking about 2 billion people–there are still over 100 million people with money to spend (this is being conservative as most Chinese tell me it’s more like 200 million).
They are already the number 3 consumer of luxury goods in the world behind only the US and Japan and expect to be number one by 2015–much like Russia and Eastern Europe in the 90s, new money loves to show off. If you’ve been to Las Vegas recently, you understand just how formidable they are as consumers and with Steve Wynn and MGM investing heavily in Macau, I think there is no doubt.
Basically, Nike and Adidas are right where they need to be.
The whole world is was watching the Olympics and the athletes in their branded products compete for gold.
Brands are shaped through perception and great marketing. Nike was the most obvious of the brands in apparel and footwear with Adidas a relatively distant second on the apparel side. Because of the hype surrounding Michael Phelps and his obvious choice of suit (Speedo) and the warm up wear (Nike).
If I were to award medals for how they ranked in terms of power of brand and perception it would be:
NIKE – Gold Medal
Speedo – Silver Medal
Adidas – Bronze Medal
This is a home run in terms of promotions and advertising. Each of these major brands will realize their investment many times over. Their brands are repeatedly seen on TV for minutes at a time. Where else could they ever hope to get this kind of exposure for such a minimal cost? Everyone wins!
China is the consumer market, hence many retailers being there in recent years. It has had 15 years of economic development and massive growth. Yes there are poor parts of the country. However, China is a resounding success and the wealth continues to spread. Adidas, Nike and Speedo and many other western brands have put themselves in the Chinese consumer’s mind and are ready to capitalise on this fantastic market.
The China public is so proud and the Olympics has been fabulous. This can only be good news for the supporting brands.