Nike and Adidas are locked in a digital arms race

Adidas is investing more than €1 billion in a digital transformation.
Adidas is investing more than €1 billion in a digital transformation.
Image: Reuters/Axel Schmidt
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If there’s one thing Nike and Adidas appear to agree on, it’s that the future of the sneaker business is digital.

The fierce rivals have both been investing heavily in their end-to-end digital capabilities, from how they design sneakers to how they manufacture them and ultimately how they sell them. The pandemic has only cemented their commitments, as sales to shoppers through their online storefronts proved vital to keeping their businesses afloat while stores were closed and foot traffic plunged in key markets around the world.

The latest salvo comes from Adidas, which announced plans today to invest more than €1 billion ($1.2 billion) through 2025 on a digital transformation of the company. By that time, the company says, “the vast majority of adidas’ sales will be generated with products that were created and sold digitally.” The investment will see Adidas hire more data and technology experts, including more than 1,000 in 2021 alone, and implement a new digital management system.

Nike, meanwhile, has been expanding its digital capabilities and gathering talent through an acquisition spree it began following the 2017 debut of its “consumer direct offense” strategy, intended to let it deliver personalized service to shoppers on a global scale. In 2018, it bought data analytics firm Zodiac. The next year it acquired Celect, a specialist in using data to predict demand. This February, it snapped up Datalogue, a data integration start-up Nike said will let it turn raw data into insights it can act on immediately.

The push to digitize spans a number of processes across the companies. Adidas, Nike, and many other footwear manufacturers are increasingly designing in 3D software and using digital printing to create prototypes faster while reducing the number of physical samples they need to create. Adidas and Nike have also spent to digitally integrate their supply chains and increase automation.

A trend toward digital shopping

Most visible to shoppers, though, are the ways they’re investing in technology to sell their goods. Both have already built out an ecosystem of apps dedicated to general retail, new sneaker releases, and running or training. (Members who sign up are particularly valuable customers since they tend to spend more and make more purchases.) They’re also working to create one seamless experience across their e-commerce sites, apps, and stores, including those of their retail partners.

The online parts of their businesses are where the companies see their sales rising fastest. “We’ve now had three straight quarters of roughly 80% digital growth,” Nike CEO John Donahoe told investors during a December earnings call. “The consumer shift to digital is permanent, and our digital penetration will only increase in years to come.”

At Adidas, e-commerce grew 53% in 2020, reaching more than €4 billion. The company expects to double online sales to between €8 billion and €9 billion by 2025.

These sales are crucial to the shift Nike and Adidas are making to sell more products straight to shoppers rather than through retailers, a trend the pandemic has accelerated. Toward the end of 2020, each company reported that about 40% of total sales were direct to customers.

In its announcement today, Adidas said its direct-to-consumer sales should account for more than 80% of its expected growth through 2025, and will make up about half its total business. Its digital investments, it noted, will be key to hitting those targets.