Global sales strategy

Global sales strategy
in 2009, the adidas Group established the Global sales function, to promote and fully leverage the commercial activities of the
adidas and reebok brands. the function is organised into two distinctive channels – wholesale and retail. By catering more
specifically to these two business models, the Group is in a better position to act on multiple customer and consumer needs, be
more responsive to market developments and manage channel synergies by establishing best practices worldwide.
wHolEsalE stratEGic Pillars
to BEcomE tHE
GloBally lEadinG
salEs orGanisation in
tHE sPortinG Goods industry
activating our brands at retail
Building strong partnerships
with leading and most dynamic retailers
N°-
01
leading in cost to serve, best-in-class in efficiency
leading in all channels
54 GrouP manaGEmEnt rEPort – our GrouP Global Sales Strategy
Excellence in execution in all
markets and channels
In 2009, the Global Sales function was
formed to direct all local market organisations
responsible for the distribution of
the adidas and Reebok brands. A crucial
element to achieving commercial success
is the understanding that brand presentation
must be competitive in an environment
where consumers make their final
purchase decisions based on availability,
convenience and breadth of product
offering. Therefore, the key priority of
Global Sales is to design and implement
state-of-the-art commercial strategies
that ultimately engage consumers with
interactive product and rewarding pointof-sale
experiences.
To better achieve these goals,
Global Sales is organised into two operating
segments, Wholesale and Retail,
recognising that different skill sets
are required to manage these distinctive
channels.
Wholesale is defined as every business
where the consumer pays his purchase
to a non-Group retailer, while Retail is
defined as any business where the consumer
pays his purchase directly to an
entity of the adidas Group.
As part of their mandates, these
segments are also primarily responsible
for the delivery of the short-term operational
targets and financial goals for the
adidas and Reebok brands. As such,
following the Group’s reorganisation,
Wholesale and Retail are the primary
operating segments of the adidas Group.
wholesale: becoming the leading
sales organisation
The main strategic objective of the
Wholesale segment is to deliver profitable
market share growth by becoming
the most effective and efficient sales
organisation in the sporting goods industry.
To realise this, the Wholesale sales
organisation takes the go-to-market
strategies handed over by Global Brands,
and commercialises them within a clearly
defined framework across various distribution
channels.
Our most important distribution channels
are sporting goods chains, department
stores, independent sporting goods
retailer buying groups, lifestyle retail
chains and e-tailers. In this respect,
Wholesale strives to establish strong
partnerships with the most dynamic
retailers in their respective channel of
distribution by offering best-in-class
and tailored services. The principles to
achieve this include:
Differentiating and segmenting
product offering to match channel
strengths.
Harmonising and standardising of selling
models and processes to achieve
efficiency and cost leverage and reduce
working capital requirements.

customer and range segmentation
to drive effectiveness
Rolling out standardised product
range packages around the globe is an
important part of the Group’s wholesale
strategy. The initiative, which was first
designed and implemented in Europe,
involves a customer segmentation
strategy that facilitates the systematic
allocation of differentiated product packages
to groups of comparable customers.
This segmentation is broadly based on a
distinction between sports and lifestyle
retailers that either have an up-market
“brand-driven” positioning or a valueoriented
“commercial” positioning. By
best suiting their specific needs, this
provides Global Sales a platform to
better exploit market potential, while at
the same time supporting the reduction
of complexity and costs. In addition,
Wholesale continues to partner with
retailers on increasing the level and
quality of sell-through information the
Group receives. This creates a mutually
beneficial understanding of their needs
that will help the Group become a more
valuable and reliable business partner to
our retailers, driving incremental business
opportunities.
retail space management to
drive efficiency
Retail Space Management (RSM) comprises
all business models helping Global
Sales to expand controlled space in retail.
The Wholesale function is cooperating
with retailers along the entire supply
chain to bring best-in-class service all
the way through to the point of sale. By
helping to improve the profitability per
square metre for the Group’s retail partners
as well as improving product availability,
we can achieve higher customer
satisfaction, thus driving share of retail
shelf space.
The three predominant models to
drive the success of RSM for the adidas
Group are Never-out-of-stock, FLASH
collections and Franchising.
never-out-of-stock (noos): The NOOS
programme comprises a core range
of basic articles, mostly on an 18 – 24
months lifecycle, that are selling across
all channels and markets. Overall, the
NOOS replenishment model secures high
levels of product availability throughout
the season, allowing for quick adaptation
to demand patterns. Retailers have to
provide dedicated retail space, co-invest
in fixtures and fittings and commit to a
“first fill” representing about 25% of total
expected seasonal demand to participate
in this programme. In return, customers
can profit from significantly reduced
inventory risk on these products. Most
NOOS articles are on an end-to-end
supply chain, thus limiting the adidas
Group’s inventory risk as we re-produce
following customer demand.
FlasH collections: The FLASH programme
consists of pre-defined collection
packages that are delivered every
4 – 6 weeks to retailers’ doors, including
basic point-of-sale promotional materials
to promote dedicated retail space
provided by the retailer. All articles of the
FLASH packages are exclusively developed
for this programme with the intention
to bring freshness to the retail space.
With a short development lead time, we
are able to reflect recent product and
colour trends in the FLASH range. As no
samples are available during sell-in, the
customers buy into a business proposition
rather than traditionally selecting
individual articles. In return for this
commitment, the retailers have the right
to selectively return articles of every
FLASH collection that have not sold out
during the defined retail window. Overall,
the FLASH programme helps to improve
brand image while limiting inventory
risk for the customers. The FLASH programme
has been started in 2010, with
full-scale rollout planned from 2012
onwards.
Franchising: Mono-branded store
franchising is one of the Group’s prime
growth opportunities, as it offers superior
brand presentation. Franchise stores are
financed and operated by franchise partners.
The adidas Group normally contributes
to the costs for brand- specific
fixtures and fittings each store has to be
equipped with.
Further, we support our franchise
partners with a comprehensive franchise
concept, including range propos itions,
IT systems, training concepts, and
guidelines for store building and store
operations. This ensures that the quality
of the brand presentation and the service
offered to the consumer are at all times
high and comparable to our own retail
stores.
Harmonisation and standardisation
of processes to exploit leverage
While understanding that market and
consumer needs require differentiated
distribution policies, the establishment
of the Global Sales function is also an
enabler to further leverage the size of
our Group and reduce complexity by
implementing best operational practices
across our wholesale activities. The harmonisation
and standardisation particularly
of back-end processes can help to
further reduce cost through simplified
IT systems and applications. Similarly,
and already started in Europe, we are
rolling out a trade terms policy that
rewards customer performance either
by higher efficiency (e.g. in logistics) or
better sell-out support (e.g. by point-ofsale
activation). As part of this effort we
will harmonise trade terms definitions,
and we have established regular reporting,
delivering meaningful benchmarks
that allow us to tightly control our
investments.
GrouP manaGEmEnt rEPort – our GrouP Global Sales Strategy 55

Etail stratEGic Pillars
N°-
02
to BEcomE a
toP rEtailEr By dElivErinG
HEaltHy, sustainaBlE GrowtH
witH outstandinG rEturn on invEstmEnt
Focus on consumers
achieve operational excellence
Exploit portfolio of brands
leverage global presence and scale
56 GrouP manaGEmEnt rEPort – our GrouP Global Sales Strategy
retail: becoming one of the top
retailers in the world
Our strategic vision for Retail is to
become one of the top retailers in the
world by delivering healthy, sustainable
growth with outstanding return on
investment. Over the past five years,
the adidas Group has evolved into a
significant retailer, operating more that
2,200 stores for the adidas and Reebok
brands worldwide. In light of the increase
in importance of retail to the Group’s
performance, a new retail leadership
team was established in 2009. This team
is mandated to create global retail guidelines
that enable higher efficiency and a
common framework to drive long-term
profitability for the adidas and Reebok
retail operations around the globe.
To become a more successful
retailer, Retail has defined four strategic
pillars:
focus on the consumer,
achieve operational excellence,
exploit Retail’s portfolio of brands,
leverage the Group’s global presence
and scale.
To execute on these pillars, Retail has set
its strategic priorities around improving
its delivery on the five P’s of retail.
People
The consumer and our employees
are the primary reference points for
Retail’s business model. Retail constantly
strives to interpret and adapt to
consumer demand, targeting a mix of
new and loyal consumers, whether it be
sports-active, sports-inspired or casual
consumers. A focus area for development
in this respect is the creation of
loyalty programmes that are attractive
to the various consumer groups of our
brands. To make sure that consumer
needs are being met, Retail will set up
organisational teams and recruit store
staff that are passionate, knowledgeable
and whose highest priority is to serve
the consumer.
Products
The key element of Retail’s product
strategy is to ensure that relevant products
are presented through the Group’s
various retail formats to match the
intended consumer profile. This requires
a product offering that needs to be pricecompetitive,
simple to understand, easy
to find and, most importantly, available
at the right time and at the right place.
To achieve this goal, Retail will leverage
the product assortments, concepts and
point-of-sale materials provided by
Global Brands in an effort to match realtime
consumer trends.
Premises
The start of a pleasant shopping experience
is the store. It is the meeting point
between the consumer and the brands.
Therefore, it is of highest importance that
our retail environments are inspirational,
athletic, fun and interactive, while at
the same time being laid out clearly
and logically to make it easy to shop.
Another focus of the premises strategy
is related to the real estate management
process. To efficiently drive higher
sales per square metre, Retail is setting
up real estate teams who focus on two
main elements. Firstly, store location and
store size must fit to the local market.
Secondly, retail location must follow
a joint distribution roadmap aligning
distribution policy between Wholesale
and Retail. To this end, in 2009 we put a
cross-functional team in place to analyse
every country and every major city to
avoid business cannibalisation.

Processes
Streamlining and harmonising retail
store operations and supply chain
processes to gain the necessary speed
to respond to consumer requests is a
top priority for Retail in 2010. From a
store perspective, a key initiative is to
embed new retail standards that drive
visual merchandising effectiveness and
back-office consistency in all markets.
In addition, Retail will also continue to
work on adapting the supply chain and
buying and demand planning processes.
This is essential as we strive to increase
our in-season flexibility, be more responsive
to changing trends and to achieve
economies of scale for the Group’s retail
activities.
Profitability
To increase the commerciality and profitability
of the Group’s existing retail assets
is the primary focus for all retail teams,
whether they are working in logistics,
store operations, marketing or any other
retail function. Therefore, in the short
term, we will limit new store openings
and close down stores not reaching their
potential, as well as implement new store
review processes to ensure that current
retail assets maximise profitability and
return on investment.
E-commerce: building a
successful channel
At the beginning of 2010, a new leadership
team was put in place to define and
outline the further strategic direction
of the Group’s e-commerce business
activities for the adidas and Reebok
brands. Although both brands have
made advances with their respective
e- commerce platforms in recent
years, we believe there is considerable
untapped potential for the Group in this
channel of distribution.
adidas retail Formats
As we have evolved as a retailer, we have learnt that shopping should be an
experience. That is why we put a lot of thought into the design and layout of
our stores. We strive to create a shopping environment that visually brings
brand identity and positioning to life and encourages consumer interaction.
For example, our adidas Sport Performance stores emphasise our depth in
sport see photograph (top), whereas adidas Originals store formats such
as “Atelier” engage their audience in authentic, creative and interactive ways
see photograph (bottom).
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09
GrouP manaGEmEnt rEPort – our GrouP Global Sales Strategy 57