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Adidas, Nike Vy for China Youth Market

Posted by Abe Sauer on February 27, 2013 10:32 AM

Adidas may have closed its last factory in China, but the athletic brand still means to stay in the nation in a meaningful way with other suppliers and more importantly in the hearts of consumers. So far, the brand is headed in the right direction, logging a 23 percent jump in China sales in 2011 (to $1.5 billion) and a nine month sales growth of 16 percent. (Full year 2012 earnings to be announced March 7.)

Adidas will be facing down Nike, a stock Citi just upgraded based largely on the Swoosh's China outlook. Both brands are joined by other foreign names for the emerging China youth market.

The expectations and brand characteristics valued by China's youth have changed and keep changing. New stresses by the segment on creativity and individual expression are challenging athletic brands to up their games in China. The challenges facing athletic brands in China to control the brand message of free expression when targeting an age group that consumes a third of all clothing sold in are immense. Hint: Start with skateboarding.

Mary Bergstrom, author of "All Eyes East: Lessons from the Front Lines of Marketing to China's Youth" and founder of the The Bergstrom Group, told brandchannel that China's market for athletic brands has taken dramatic turns. She sees a new challenge for foreign brands like Nike and Adidas. "The challenge for these companies is not to think in the same terms as they have in the past—the competitive spirit that made these Western brands icons in the first place is out of date and place in modern China."

"In China, we partner with a number of celebrities whose passion and character reflect our brand. For example, Fan Bingbing and Eason Chan are our brand ambassadors for Adidas Originals, reflecting the brand’s values with their unique style and creativity," said Colin Currie, Managing Director, Adidas Group Greater China.

Speaking to the desire of Chinese youth to demonstrate unique style and individual creativity is especially important for athletic fashion brands like Adidas. This youth target is distinctively different than China's more mature luxury market, which largely eschews personally sticking out in favor of buying into an established, peer-recognized definition of style and value.

Adidas' engagement with individual identity in China started with a shift from its brand as an athletic one to Adidas as a fashion label. 

During the recent Chinese Spring Festival holiday, Adidas took over the cover of popular street-style magazine 1626. (Volkswagen did this with 1626 in 2011.) The promo featured a hard, Spring Festival-branded cover fold-over as well. Simultaneously, Adidas' "Get Out There" message also occupied the cover of similar street fashion magazine Milk. (Notably, a month later, Puma was Milk's cover brand.)

Bergstrom warns that brands risk losing China's youth if they do not engage in conversation beyond telling youth what is cool. "They are looking for more than Western or Chinese celebrities, more than tech savvy gimmicks, they want something with personal relevance and true meaning."

With that in mind, western athletic brands are acting fast to make sure the brand conversation about individualism and creativity is more than a one-way, brand-down one.

Last year, to much Weibo buzz, Adidas brought its Adidas Originals collection to Shanghai. (Adidas Originals' Weibo account has over 564,000 followers.) Originals is a wide-ranging collections of unique designs, including shoes with butterfly wings, rainbow snow boots and a Jeremy Scott collection with pink poodles. The wide variety of the collection encourages mix-and-match pairing, allowing for thousands of possible outfits and presentations. Very unique, very individual presentations.

This move away from athletic messaging to free expression in China is not lost on Adidas' China competition. Last month, Nike opened its action sports flagship store in Beijing. For the store, Nike chose the Xidan district, known as the epicenter for China skateboarding culture. Skateboarding has quickly grown in China to represent free expression and creativity, the athletic jazz of Chinese youth.

In September 2012, the parent company of Vans, the western shoe brand maybe most associated with the skateboarding lifestyle, announced at a meeting in Shanghai that the brand would seek "to be the number one action sports and youth culture brand in Asia, helping consumers embrace, elevate and unlock their creative self expression." It added that Vans' growth "is expected to come from leveraging the brand's authenticity and deep connectivity with youth culture, focusing on its skate and music brand pillars." In 2009, Vans produced the Vans China Skate Tour.

Puma meanwhile has enlisted the talents—and considerable Weibo following—of China's favorite "diaosi" Mike Sui. For its Puma Social line, Sui and collaborators created a series of Web ads that, while Chinese in flavor, easily could have passed as urban-posse, skater-focused hipster viral marketing in the West.

It's not just shoe brands. Last year, China's Snow Beer added a rock climber to its label not because anyone rock climbs in China but because such branding, as Matthew Crabbe wrote at Access Asia, "appeals to, and is drunk by, skateboarding youths in cities like Shanghai, who identify with this kind of image." That identity is one of freedom of expression, whether it be a kickflip or a cliff face. 

Finally, athletic brands must remember the neighborhood in which they're meeting China's youth. Marketing in China's tier city system can be complex.

Adidas plans to open over 500 more stores in both China's higher and lower tier cities in 2013. In lower tiers, Adidas will use a segmented approach, offering a more affordable, entry-priced product range. Meanwhile, in upper tiers, Currie said, "Consumers in these markets are also more sophisticated, brand and style conscious. As a result, we’ve focused on providing more premium sport performance products that feature our cutting-edge innovation and technology as well as sport-inspired fashion with footwear and apparel from our Adidas Originals brand."

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