Adidas Global CEO Herbert: No Fear Of Making Mistakes

CEO

Herbert Hainer

Herbert Heiner (Herbert Hainer) had no ties, and the buttons of his shirt collar loosened freely. It seemed that he wanted to wear an alternative sport. Herbert Heiner, 56, was still a sports controller. He liked running in the woods near his house, and he also loved skiing.

This state is very close to his identity - Adidas group global CEO, during his nearly 10 years in this position, he led the world's top sporting goods company to nearly doubled its turnover to nearly 11 billion euros, and its net profit has tripled to 642 million euros.

But this is not enough. The CEO has to continue to run in the direction of surpassing Nike and becoming the biggest sport in the world.

However, in 2008, the global financial crisis hit Herbert Haina to a certain extent. In 2009, the turnover of Adidas group fell by 3.9% compared with the same period last year. Net profit fell by 61.8% compared with the same period last year. The performance in the Chinese market was also unsatisfactory. Due to the high expectations of Adidas in the sales market before the 2008 Olympic Games, in the fourth quarter of 2008, the economy was plunged into an awkward situation of excessive inventory, and spent a considerable amount of time dealing with inventory and channel problems in the following year.

A year later, Herbert Haina announced a new development strategy at the end of 2010, saying it would increase sales by 45%-50% in the next five years.

The question is: has Adidas gone out of the bottom? How will Herbert Hainer explain why he met Waterloo in 2009? How can Adidas win in the North American market where Nike's status is unshakable? Adidas, which has a very good performance in India and Russia, is experiencing high inventory in the Chinese market. Is the 2008 Olympic strategy inappropriate?

In an exclusive dialogue with reporters, he gave explanations and left suspense.

Among them, the biggest suspense or possible surprise is how to increase Adidas's current e-commerce sales to around 500 million euros in 5 years. Does this mean that the global brand consumer company is on the "cloud sales" mode?

New five year growth

Reporter: you plan to increase sales by 45%-50% in the next 5 years, how can we achieve this growth?

Herbert Heiner: This is an ambitious plan, and it is also practical.

We do not need to invest more in the existing investment, that is, our investment in new stores in the world, especially in China.

Reporter: what strategies and methods have you implemented in the past 5 years to prepare for future development?

Herbert Haina: basically, we believe that it is our fundamental goal to become an ideal and strong brand that consumers want. We strive to achieve this fundamental goal by constantly putting new products into the market and communicating with consumers.

If you pay attention to our financial statements, you will find that we have achieved growth everywhere. In China, the United States, Europe and Latin America, all of our brands have developed very well.

Reporter: but we also see from the earnings report, in 2009, the company's performance fell sharply. So why did the above advantages and investments fail to play a role in that year?

Herbert Haina: we must be very careful when discussing financial issues in 2009.

If we don't consider the currency factor, we lost only 4% in 2009 compared with the most successful 2008 in the company's history.

The main reason for our loss in 2009 is money.

Because all currencies are substantially depreciating against the euro.

For example, the ruble dropped to 6% against the euro, and the dollar, pound and so on were all depreciating sharply.

The renminbi is one of the few currencies that have not depreciated against the euro.

So the depreciation of the currency made us suffer a lot in 2009.

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Three pillars of sales

Reporter: your marketing system is very special. For example, a new Department has been set up to direct sales worldwide. Why do you need to set up this department specifically?

Herbert Haina: in terms of sales, we now have three major departments, namely, wholesale (wholesale), retail (retail) and electronic commerce (e-commerce).

Because many countries do not have a normal retail system (retail infrastructure), such as Russia and India, we have to set up our own stores to ensure that consumers have the opportunity to see our products.

In order to operate in a more professional way, we have set up a special department.

Reporter: we noticed that in the past nine months, Adidas's direct sales growth was almost two times the overall sales growth rate.

Herbert Heiner: specifically, we plan to increase our direct sales from about 2 billion to 4 billion in the next 5 years.

At the same time, we plan to increase wholesale sales from 6 billion 300 million to 8 billion 500 million.

We also plan to develop e-business vigorously, so that sales will grow from near zero to around 500 million by 2015.

Reporter: what challenges do we face to achieve direct sales growth in the world?

Herbert Heiner: it is the biggest challenge for us to correctly configure personnel, select and set up a good team.

Reporter: the outside world is very interested in your e-commerce strategy.

Herbert Haina: before 2008, the company launched small-scale e-commerce business in the US and Europe, but it did not rise to a very professional level, nor did it have a global integrated development strategy.

Now we realize that the company needs to develop a broader, sustainable and global development strategy.

As e-commerce is a new sales channel, we need new and suitable talents, so we appoint Mr. Christophe as chief e-commerce officer of the company.

Reporter: How did the board of directors think about the development trend of electronic commerce before? The development of e-commerce changed the regional competition pattern. What challenges and opportunities did you think it brought?

Herbert Heiner: first and foremost, we will consider our consumers and analyze their buying behavior, tastes and new consumption trends.

In addition, consumer research has also made us realize that new generation of young consumers are increasingly turning to the Internet and digital domain. So we have invested heavily in website advertising, such as Facebook, Tweeter and so on.

Because our target consumer network buying behavior is more and more, while the physical store buying behavior is less and less, in order to enable them to have the opportunity to buy our products, we must vigorously develop e-commerce business.

There are two choices for e-commerce: one is to cooperate with wholesalers, the other is to do it by themselves.

We choose to cooperate with our own wholesalers.

Reporter: can you talk about the product supply chain? In my view, the biggest challenge facing e-commerce is from the product supply chain.

Herbert Haina: if we want to make more progress in e-commerce, we must make a faster and better response to market demand.

In China, we strive to establish close contacts with distributors and retail partners in order to get market data faster and react faster.

From the company's own retail network, whether it's a direct store or an e-commerce platform, we can get information feedback at the first time.

For example, from the e-commerce platform, we can get the sales data and data during the day, we analyze these data and send it to our purchasing platform immediately, and adjust our purchase plan accordingly.

China's loss and gain

Reporter: finally, let's focus on the Chinese market.

We all know that after the 2008 Olympic Games, Adidas has been plagued by a lot of inventory. What caused the situation? Reviewing the strategy adopted by the company on the 2008 Olympic Games, do you think that some of the decisions are incorrect?

Herbert Heiner: making mistakes is inevitable and we are not afraid of making mistakes.

For your question, I think there are two main reasons.

First, before the 2008 Olympic Games, everything was developing rapidly in China. We maintained an annual growth of about 50%, which was equal to that of Nike. Our pre-sale system for order management was generally 6 months ahead of schedule. When the Olympic Games were held in August, we had already placed orders for the first quarter of 2009. When October financial crisis arrived, our products had already entered the retail network, and the products to be sold in 2009 began to be put into production.

The second reason is that Chinese people spend too much money during the Olympic Games. After the Olympic Games, they choose to reduce consumption, and then the financial crisis is coming.

Therefore, on the one hand, customers reduce consumption, on the one hand, we have put our products into the market, which has led to the backlog of our stock.

Reporter: We tracked the development of many local sports brands such as Lining and Anta in the past few years, and found that their inventory pressure and the impact of the financial crisis are smaller than yours.

How do you view this phenomenon?

Herbert Haina: these brands produce goods locally in China, and their production cycle is shorter than ours.

As far as I know, Lining is facing the problem of inventory, and now we are basically free of this problem.

Reporter: what is Adidas's new development strategy in China in the next five years?

Herbert Heiner: in the next five years, we will strive to achieve two digit growth in the Chinese market.

On the one hand, we plan to open retail outlets in more cities, mainly in two or three tier cities, including direct operation and cooperation with distributors.

On the other hand, we will strive to further improve the company's sales and profits in the first tier cities.

We hope to succeed in brand expansion. Of course, our core business is still around sports events.

Reporter: for you, which is more important for China's first tier cities and two or three tier cities in the next five years?

Herbert Haina: we will formulate strategies according to the characteristics of different cities.

Our latest market research report shows that in the next five years, the disposable income of consumers in China's two or three tier cities will continue to increase, which we call the rising middle class consumers.

This has supported my confidence in the company's profit growth in the two or three tier cities.