By most key metrics, Germany’s sportswear giant Adidas falls well short of its surging US rival Nike. Its share of the US athletic footwear market barely tops 6%, compared to about 68% for Nike, according to Euromonitor. And even in its home market of Western Europe, Adidas has fallen behind Nike in sales growth, according to the Financial Times (paywall).
But Adidas can take heart in one important metric: the speed of its market share growth in the Greater China region (which includes Hong Kong, Macau, and Taiwan). There, at least, Adidas has outperformed Nike—and significantly closed the gap. From the beginning of 2011 to the start of 2015, Adidas improved from 8.5% to 13.8% of market share, compared to 11.2% to 14.3% for Nike, according to Euromonitor.
That’s important because, after the United States, China has the world’s largest sportswear market, well ahead of Japan, Brazil, and Germany. In the first nine months of last year, Adidas’s sales in Greater China grew 18.4% compared to 2014.
Adidas lost ground in China when it experienced oversupply problems following the 2008 Beijing Olympics, which didn’t spur market growth as much as anticipated. But the company ”caught up pretty impressively over the last five years” James Roy, a retail analyst with China Market Research Group, told Quartz. It accomplished this partly, he said, by tightening links with sellers to ensure it was “resupplying the products that were really selling the best.”
The company also focused on women’s sportswear and branched into casual lifestyle clothing. It opened women’s stores not only in major metros, but also secondary cities including Chengdu, Shenyang, and Chongqing. On the marketing front it partnered with local celebrities, including actress Fan Bingbing and singer Eason Chen, as brand representatives (link in Chinese).
“Adidas’s focus shift away from being exclusively a sportswear brand is the key to its relative success,” Matthew Crabbe, a research director at Mintel, told Quartz. “Sportswear has shown slower growth than casual wear, and has many competing brands.”
In China consumers “want apparel they can do sports in, but also go to social occasions in,” Colin Currie, managing director of Adidas Group Greater China, told CNBC. “You know in lower-tier cities, it’s OK to go to a wedding or to work in Adidas. It’s actually acceptable.”
Some observers worry the focus on fashion—a fickle business to begin with—could hurt the company if China’s economic woes continue to deepen. “With the weak economy consumers are looking for more value,” Shaun Rein, a retail consultant in Shanghai, told the Financial Times (paywall). “Adidas has been more focused on fashion, and consumers tend to shy away from fashion in weak economic times.”
Still, the strategy has worked so far. And in China at least, Adidas has Nike looking over its shoulder.