Nike Versus Adidas: Raging Battle During the PandemicBy Daniel González | Tue, 05/26/2020 - 14:43
Holmes and Moriarty. Messi and Cristiano Ronaldo. Adidas and Nike. One cannot understand the existence of one without the presence of its nemesis. Despite operating in very similar scenarios, sharing major markets and offering very similar products, Adidas and Nike have faced COVID-19 and its impact on the value chain in radically different ways. The eternal battle between these two contemporary emblems has moved from the sports field to the COVID-19 stage. A few days ago, Nike announced its data for the third quarter of its fiscal year (December 2019 - February 2020), where it had a net profit of US$849 million, representing a 23 percent drop against the same period last year. The numbers for Adidas, its main competitor, were much worse. In 1Q20, the German company had a profit of US$34 million, 95.1 percent less than the same period in 2019. A month before its accounts were made public, Adidas had requested a financial bailout from the German government. The ‘three stripes brand,’ one of the most established in the world, needed US$3.3 billion to survive.
Latin American and North American markets, while important, were not enough to avoid store closures of all Adidas stores in the Asian market, a scenario that caused a loss of US$1.4 billion for Adidas, according to Forbes. At that time, bankruptcy was much more than a possibility for Adidas, despite the good performance it had shown in regions such as Latin America, where Mexico appeared as a key market.
After various historical ups and downs and continuous changes in ownership, at the beginning of the 21st century Adidas became one of Germany’s great businesses. Its commitment to design and popular culture, its respect for tradition and its diversification made it the second most important player, behind Nike, in an industry that according to Market Watch will be worth US$108.7 billion in 2025 compared to the US$84.1 billion it generated in 2017. The COVID-19 crisis came at a time when Adidas had bet on digitalization with the same passion as Nike. However, in that context, while Adidas was negotiating a loan with KFW, the German development bank, and other financial institutions, Nike managed to increase its online sales by 36 percent between January and March 2020 compared to the previous year.
Over the last five years, Adidas had put all of its efforts into digitalization, but as Simon Peel, Global Media Director at Adidas, said during the EffWeek conference, “the gamble was not right,” as it neglected long-term brand building, which led to a loss of loyalty from many of its customers. Now that the economic rescue has been approved, the company has announced that it will bet on digital acceleration, boosting its e-commerce platform, using artificial intelligence to make its processes more efficient and using 3D printers to reduce costs and increase production volume. The goal is to recover but also to not lose sight of Nike in the battle for control of the world’s sport.
Comparable to its economic results, Nike has also added successful advertising campaigns. Unlike Adidas, Nike has always based the development of its brand based on emotions, trying to inspire athletes around the world through messages that go beyond physical exercise. ‘Play inside, play for the world’ was the title of the successful campaign, which used a mix of images of sports stars and anonymous athletes to encourage people to continue training at home. Cristiano Ronaldo, Lebron James and other athletes participated in the campaign, which also emphasized the simplicity of product delivery worldwide in a matter of days through the nike.com platform.
Executive Director of Nike, John Donahoe said that “Nike was the fastest to adapt to the Chinese scenario.” According to the company itself, in that country and during 1Q20, sales increased by 30 percent over the previous year, while activity in its physical exercise applications increased by 80 percent. Nike also bet on its online sale of limited editions of its most successful products, such as Air Max or Air Jordan, and decided to focus its R&D department on the manufacturing of masks and medical equipment that would be donated to the University of Oregon hospitals. All these measures, past and present, have placed Nike as a winner in the new battle against Adidas.
As the latter looks for formulas that will return the brand to the position it held in the pre-COVID-19 world, the future for Nike looks brighter. The brand has reopened stores in more than 15 countries, including Germany, the Netherlands, Brazil and the US. "Forty percent of the brand’s own stores in Europe, the Middle East and Africa are open. In Asia-Pacific and Latin America, 15 percent of stores are open and 5 percent are open in North America,” the brand said in a statement. Adidas, meanwhile, remains focused on revitalizing its digital platform, as CEO Karsper Rorsted said in a statement released by Business Insider. “At the moment, we are focused on managing the current challenges and doubling down on the recovery in China and the opportunities we see in e-commerce,” he said. In the same press release, Rorsted noted that 70 percent of the brand’s stores worldwide remain closed.