Reebok 2007 Annual Report Download - page 53

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ANNUAL REPORT 2007 --- adidas Group
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- In the Coastal segment, adidas targets a young consumer
group inspired by action sports. This includes a continued
focus on the brand’s successful skateboarding-inspired
product offering.
To ensure future sales growth in the sports lifestyle market,
adidas will offer new concepts and – at the same time – further
differentiate and segment distribution at wholesale and in
adidas own-retail stores.
SPORT STYLE: BUILDING A FASHION BUSINESS ON THE SUC-
CESS OF Y-3 Another key element in the Sport Style division is
the high-end Y-3 fashion collection developed in collaboration
with designer Yohji Yamamoto. Introduced fi ve years ago, the
Y-3 business has grown substantially and has become a key
image driver for the adidas brand. Through Y-3, adidas has
created its own niche in the highly competitive world of fashion.
New collections are launched twice a year at the New York
fashion week. To drive the Y-3 business worldwide, adidas
focuses on controlled space initiatives with high-end retailers
as well as own-retail activities. In 2008, adidas expects to
grow sales in the fashion category at a double- digit rate.
OPTIMIZING WHOLESALE BUSINESS Success in both Sport
Performance and Sport Style requires an effective distribution
strategy. The right presentation and availability of consumer-
relevant product as well as excellent customer service at the
point-of-sale are critical in this context.
adidas generates around 83 % of its revenues through its
whole sale business – where adidas sales subsidiaries sell
footwear, apparel and hardware/accessories to retail partners.
In general, the brand’s customers include sporting goods,
sport specialty, athletic specialty and family footwear retailers
as well as high-end department stores and directional
accounts in the Sport Style division. To preserve the premium
image of the adidas brand, it generally does not sell its prod-
ucts to value or discount chains.
In a few markets, where adidas does not have its own sales
subsidiaries, the brand partners with third-party distributors
that sell its products to retail. To have maximum brand control,
however, adidas’ strategy is to continuously buy back distribu-
tion rights and establish own sales organizations as appro-
priate.  see Risk and Opportunity Report, p. 104
In 2008, adidas will also continue to optimize its wholesale
proposition by further segmenting its product offering to retail-
ers. After the successful introduction of the new distribution
model in the UK, the brand plans to roll out similar models in
other major European markets.
EXPANDING CONTROLLED SPACE In line with the Group’s
distribution strategy,  see Group Strategy, p. 044 the adidas brand
focuses on the expansion of controlled space:
- By further growing its own-retail business and extending
the mono-branded store network particularly in emerging
markets,
- By diversifying its own store formats and establishing a
multi-dimensional store portfolio comprising Metropolitan
stores, concept stores, e-commerce and factory outlets, and
- By accelerating its roll-out of shop-in-shops with key retail
partners in mature markets.
In 2007, adidas made signifi cant progress in all these areas.
The brand’s own-retail sales and store number continued to
increase strongly. Own retail now accounts for 17 % of adidas
brand revenues.  see adidas Business Performance, p. 096 The number
of mono-branded stores in emerging markets and the number
of shop-in-shops also grew signifi cantly.
In 2008, adidas plans to further extend its controlled space
initiatives. Together with its retailer partners, the brand will
continue to open shop-in-shop formats in mature markets and
new mono-branded stores in emerging markets. In markets
with an underdeveloped retail landscape and where market
access via partners is not possible, adidas plans to further
extend its own-retail business.
As part of the continued growth of its own-store network, the
adidas brand will open its largest store in the world in Beijing
in spring 2008, which will showcase both Sport Performance
and Sport Style products. Going forward, the brand expects
to introduce more such Metro politan stores as appropriate.
adidas will also further diversify its store base introducing
category-specifi c concept store formats. Moreover, the brand
will pilot its fi rst European online shop in the Netherlands in
the fi rst half of 2008.
GROWING AVERAGE SELLING PRICES AND PROFITABILITY
adidas offers the vast majority of its footwear, apparel and
hardware products at high- and mid-level price points. The
brand’s goal is to strengthen both its market position and reve-
nues by driving continuous growth in average selling prices
and increasing profi tability. adidas believes a strong brand
image is the best defense against a promotional retail environ-
ment (i. e. competition at retail via price wars) and is prepared
to give up short-term revenue opportunities as necessary to
preserve the long-term market position.  see Risk and Opportunity
Report, p. 104