In what was considered an unprecedented move, Adidas AG, the footwear and sporting giant acquired American compatriot Reebok for USD 3.8 bn way back in 2005. This was a much thought through idea-led execution. While the Adi Dassler founded company was a lot more popular in their homegrown European market, the North American market was a lot tougher to crack. Rival Nike had more market share (at that time) than Adidas and Reebok put together. The only way to take on competition was to collaborate, instead of competing with Reebok. The fashion and sports industry was stunned with this acquisition. Retailers worldwide sighed as the same staff member who proclaimed to their customers that a pair of Reebok (shoes) was better than Adidas (or vice-versa) had to suddenly change their stance. Over time, both brands settled down with their own brand premises and promises and have stayed course.
However, the pandemic was a bigger jolt than expected for most consumer brands worldwide and the evolving category of Athleisure was no different. With curbs on stepping out of homes, virtually all over the world, save for a few parts of the US, purchase of new products across walking and running shoes, sporting gear and of course, the fashion goods reduced significantly. While a section of the world buys sporting brands to serve a purpose, another section, a majority perhaps buys them to flaunt the brand name. Add to their existing woes of new competition coming from hitherto lesser-known international brands like Under Armour and Athletica as well as several local brands globally, the big 3 have been under severe stress with regards to their sales & operations.
Store closures (temporary) due to lockdowns imposed across the world, led to many hundreds of Franchisees stepping out of the trade. E-commerce giants like Amazon and others, who offer an unconditional replacement have only made the case worse for offline retailers of sporting goods. According to a recent study, at least 40% of online shoppers in India returned their footwear due to an incorrect fit. Yet, they continue to shop online to save a visit to the nearby store due to prevailing lockdown restrictions.
Reebok has shutdown hundreds of stores worldwide. In India, the company has downed over 30% shutters over the past 2 years due to weak demand and an alternate shopping channel (that is e-comm) and currently operate over 170+ stores. Adidas had over 450 stores in India and Nike, 150 outlets. Over the recent months, many have shut down. Globally, there were over 1,000+ stores for Nike and Adidas each. India continues to be one of the strongest markets for these brands by volume although the value – Average Selling Price per unit is among the lowest in the world, perhaps due to a consumer sentiments and to wear sporting footwear as fashion accessories too. Thanks to it’s association with leading IPL Team, the Chennai Super Kings, the brand found it;s way to the deepest markets across the country, with the cricketing idol sporting the brand on his chest in his official jersey.
In Aug. ‘21, Adidas AG announced that it has sold it’s iconic “Reebok” brand to Authentic Brands Group, for 2.1 bn Euros (USD 2.50 bn), with a turnover of 1.40 bn Euros for the year 2020.
“We’ve had our sights set on Reebok for many years,” Authentic CEO Jamie Salter said in a statement. “Reebok not only holds a special place in the minds and hearts of consumers around the world, but the brand also has expansive global distribution.” Authentic has in the past, acquired several iconic retain and consumer brands and businesses such as Brooks Brothers and Forever 21. The world hopes now, that Reebok is in a safer place. In it’s former place, the brand struggled to carve a niche and faced a severe identity crisis with big brother Adidas. Like in the case of automobile giant the VW Group where Skoda cars are priced lower than Volkswagen, Reebok was always priced lower than Adidas, had an imagery that it was more value-fashion and was a perfect gift to Dads and Moms as walking shoes while Adidas was more a fashion statement and catered more to the Millennial customers. One of the first things that the new Father of Reebok would do, perhaps is an image makeover. Time will tell, how the once eponymous brand with its hip-hop American lineage and legacy would fare in an era fifty years apart.
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