Adidas to boost e-commerce business amid supply chain issues

Adidas, which expects supply chain issues to curb sales growth, will use e-commerce tools, as part of the digital transformation strategy, to grow business.
Adidas userAdidas CEO Kasper Rorsted said it will face slow growth in revenue in the first half of 2019, particularly in North America. Adidas has doubled its business in North America in the last three years to take market share from bigger rival Nike.

Adidas said its suppliers — mostly in Asia — have not been able to keep up, especially as the company has expanded from high-end products into more mid-priced clothing ranges in the U.S. market, Reuters reported.

Supply issues will knock 200 to 400 million euros, or 1-2 percentage points, off currency-neutral group sales growth in 2019, which is likely to slow to between 5 and 8 percent in 2019 from 8 percent in 2018.

Adidas removed Gil Steyaert as head of the global supply chain in February after just over a year in the role. Martin Shankland is the new supply chain head of Adidas.

Adidas digital

Adidas CEO sees big opportunity in the e-commerce market, CNBC reported. The report did not reveal the company’s digital transformation plans.

Adidas CIO Fumbi Chima is responsible for the sports and fashion retail company’s digital transformation.

“We launched our own app last year, and it’s been downloaded more than 7 million times in more than 25 countries. E-commerce is going to be a tremendous opportunity – but you have to couple it with big franchise stores or flagship stores where you can see the product,” said Adidas CEO Kasper Rorsted.

Adidas grew its online business by 36 percent. Adidas is targeting 4 billion euros in online sales by 2020 – approximately 12 percent of its business – but Kasper Rorsted said in the long-term the company expected that figure to rise to around 25 percent.

Adidas’s online business increased by 74 percent in Q3 2018. Adidas is making investment in the supply chain — especially in the U.S. — to get faster to the consumer. It is also spending on the e-commerce channels. Adidas is investing into business services for centralizing into two locations for almost all the markets.

Adidas produces 457 million pieces of apparel a year, sourcing most of them from Cambodia, China and Vietnam.

The company expects sales growth of 3-4 percent in the first half of the year, speeding up in the second half as it ramps up supplies by reallocating factory capacity and prioritizing the U.S. market.

Adidas said it targets to achieve an operating profit margin of between 11.3 percent and 11.5 percent in 2019, up from 10.8 percent in 2018, with the return of the Reebok brand to profit helping it hit a target originally set for 2020 a year early.

Nike, the main rival of Adidas, has forecast sales growth for 2019 approaching low double digits as it rolls out a steady stream of popular new products, and German rival Puma a currency-adjusted 10 percent.

Rajani Baburajan