Adidas aims for DTC to be 50% of sales by 2025
By Cara Salpini
Published March 11, 2021
A new four-year strategy is predicated on doubling e-commerce sales, building up an athleisure offering and refocusing on women, among other things.
Nike isn't the only one betting its future on DTC.
In conjunction with Adidas' end of year results, the sporting giant announced a four-year plan, dubbed Own the Game, which calls for a shift to a DTC-led model. The company plans for direct to consumer to make up 50% of net sales by 2025, as e-commerce doubles to between 8 billion euros ($9.6 billion as of press time) and 9 billion euros. That's up from a 30% DTC business in 2019 and 40% in 2020, executives said during a virtual presentation. That includes paring down wholesale partners to focus on strategic partnerships.
The retailer expects the strategy to push forward some big growth goals, including growing net sales by between 8% and 10% each year, and growing net income between 16% and 18% each year. DTC will drive more than 80% of the company's net sales growth over the next four years, according to CEO Kasper Rorsted, who spoke about the strategy Wednesday.
Harm Ohlmeyer, chief financial officer of Adidas, highlighted that consumers are now more interested in shopping directly with brands than at multi-brand retailers. The shift to focus on that channel won't be without its operational challenges, though.
"Moving from a largely wholesale-driven to a DTC-led business model is a tremendous opportunity from a strategic and from a financial perspective," Ohlmeyer said. "But it also means that an increasing share of sales is realized by shipping individual parcels to consumers instead of large bulks of products to wholesale partners. Individual product returns need to be handled, omnichannel offerings are becoming more important. All of this increases the complexity in our supply chain and we hold onto inventory longer. That said, we have a clear understanding of all of those moving parts and have a proven ability to mitigate them."
Ohlmeyer noted that the strategy shift is expected to bring Adidas "significant" market share gains, as well as higher revenues and margins. It will be fueled by larger investments in digital and marketing: The company plans to invest 1 billion more euros into marketing by 2025 than in 2021, and funnel over 1 billion euros into its digital transformation.
"We are building an integrated ecosystem," Rorsted said of how stores and digital will interact, noting that stores are most effective when they are "built into the digital ecosystem."
It's similar to the way Nike thinks of its stores, which often include digitally enabled features. Adidas is also prioritizing its membership and its apps to help deepen its ecosystem, which is a key part of Nike's strategy as well. The company currently has 150 million members, and wants to triple that, to 500 million by 2025.