Adidas is making a big bet on e-commerce as a sales channel — not just a brand awareness play — and it’s paying off.
Online is now Adidas’ most important store, said CEO Kasper Rørsted on the company’s third-quarter earnings call this week.
Online sales increased by 76 percent over the last nine months, up from the same time last year, when online sales grew 57 percent. Adidas predicts online sales will hit €4 billion ($4.6 billion) by 2020. Overall, sales grew to €5.8 billion ($6.7 billion).
This is in a year in which the brand has closed 327 stores so far, while spending nearly £900 million ($784 million) on improving its digital operations. Two years ago, the company would make quarterly or monthly updates to its e-commerce site, said Rørsted, whereas now, it makes updates on a daily basis.
This is a change in strategy — Adidas used to previously think of e-commerce as less of a volume play and more as a way to raise brand awareness.
The business doesn’t disclose channel profitability but as previous results have shown, the faster it grows in e-commerce, the more those earnings have stretched its profit margin.
“We’re heavily investing in people to help with e-commerce and are focused on how we can use the data much more diligently to help do things like dynamic pricing,” said Rørsted.
Adidas is now building a team of experts who can understand how online ads across search, social, affiliate, video and display drive traffic back to its site, according to a job post. The director of the team will work with the advertiser’s global media director to integrate all its digital ad expenditure figure out its marketing mix, including how the ad performance on platforms like Google and Facebook complements or conflicts with other channels.
E-commerce roles are in high demand at Adidas. Of the 256 vacancies in its marketing team currently advertised on Linkedin, 30 of those roles are related to e-commerce.
Some of those experts will be at work on Adidas’ new loyalty scheme, which launched in the U.S. last year ahead of a wider roll-out. Like the NikePlus membership program, Adidas is offering participants early access to products, exclusive drops and invitations to special events. The scheme will dovetail with Adidas’ in-store promotions, offers on its site as well on its shopping app.
“Some quarters will have more growth, some will have less as it depends on how many ‘hype launches’ we make as well as how much volume we have behind them,” said Rørsted. “We’re taking more than 3-year-old products and democratizing while preserving the hype.”
“Hype” launches are key to how quickly Adidas’ online sales have grown — its drop of the Yeezy Boosts by Kanye West in September got sales to jump more than 15 percent higher than the prior quarter.
The launch drove “millions of visits” to the Adidas site and the sales were above expectations, said Rørsted.
Adidas’ aggressive push to sell directly to customers also raises questions about its relationships with retailers. Since businesses like Adidas, Nike and Under Armour have made e-commerce more important, sportswear retailers like Footlocker and Sports Direct have found themselves in competition with the same businesses they sell products from.
Adidas, however, plans to make its plan worthwhile for those companies. The business will use insights gleaned from its own platforms to help its retail partners, said Rørsted, who is also creating a team that will look to move some of its wholesale marketing budgets online with its existing partners.