TRANSFORMING THE MARKETPLACE
Our Global Sales function drives the commercial performance of the company by converting brand desire into profitable and sustainable business growth. It is our ambition to deliver the best shopping experience within the sporting goods industry across all consumer touchpoints. We strive to transform the marketplace by actively shaping and accelerating the growth of our profitable and integrated trade network. Our objective is to establish scalable business solutions in order to deliver premium experiences, thereby meeting and surpassing consumer expectations with an integrated brand offering.
While 2020 saw a reduction of distribution points due to market consolidation and the impact of the coronavirus pandemic on retailers, we continue to leverage a consistent global framework with more than 2,500 own-retail stores and our own e-commerce channel, our single biggest store available to consumers in over 50 countries.
Impact of the coronavirus pandemic
The global outbreak of the coronavirus in 2020 led to a significant number of temporary store closures – both own and partner-operated – and a pronounced traffic reduction within the remaining store fleet, with a corresponding negative impact on our sales development. At the peak of the worldwide lockdown measures in April, more than 70% of our global store fleet were closed. Where and when possible, we began executing our store reopening plan in accordance with the decisions taken by local authorities. While store traffic remained below prior year levels, we registered an increase in , as consumers that visited our stores tended to have a clearer buying intent. rates
To meet the challenges we had to face in our business, we focused on e-commerce, as it was the only fully operational store and our fastest-growing channel. Through targeted consumer marketing, exclusive product launches and prioritized supply chain management we achieved an outstanding global e-commerce sales growth in 2020. In response to this, the supply chain organization adapted capacities at our distribution centers to accommodate more e-commerce inventory. Global Operations
Within own-retail, we focused on limiting the direct impact of the crisis on employees and consumers with strong crisis management and a holistic approach to reopening our stores. During store closures, we focused on staff engagement and development through 100% virtual training sessions. Also, we deployed our store staff to support our e-commerce business leveraging their product knowledge to service consumers. With digital being on top of the agenda for 2020, we drove a rapid acceleration of digital tools and omnichannel services. Starting while retail stores were still closed, ‘Ship from store’ was enhanced to support online order fulfillment. We also leveraged our digital capabilities to allow for safe and convenient shopping experiences when stores began to reopen. ‘Wait less, shop more’ in our adidas app enabled consumers to book an appointment in store to reduce waiting time. Health and safety guidelines and processes were introduced to protect our staff and consumers and to ensure our consumers feel safe upon returning to our stores. Finally, our factory outlet stores played a critical role in reducing increased inventory levels, while maintaining the brand perception as well as health and safety standards.
In our wholesale channel, we radically changed the focus toward cash flow management in collaboration with our key accounts. We proactively managed our orderbook to make stock accessible to all channels and customers, in particular pure players and omni-channel accounts. We transferred physical sell-in meetings to remote, virtual sessions leveraging our digital tools and infrastructure. We partnered closely with our key accounts to build virtual sales events to increase demand for our product among consumers. To support our online business, team members from wholesale were temporarily reassigned to digital wholesale.
Overall, the global pandemic accelerated our focus on digital and our own direct-to-consumer (DTC) channels. Our membership program more than doubled its size in 2020 and is currently reaching Club’165 million members across 15 countries, enabling us to build direct relationships with our consumers. Our own-retail stores are the physical touchpoint with our consumers and allow us to offer premium and personalized experiences, acquire new members and intensify relationships with our consumers. Moreover, long-term investments into strategic partnerships with our key accounts enable us to reach even more consumers where they shop, on- and offline.
2020 channel mix
We are actively driving the shift from wholesale to DTC channels. Selling directly to the consumer is beneficial to our top- and bottom lines and delivers deep consumer insights. In 2020, the share of DTC business, consisting of own-retail and e-commerce sales, increased significantly to 41% (2019: 33%). Wholesale accounted for 59% of total net sales (2019: 67%).
In e-commerce, we showcase our brand differentiators such as exclusive product or engaging member experiences. Through scaling and expanding our e-commerce platform, we create business impact and efficiencies. Our 2020 ambition for sales through our own e-commerce platforms was increased from up to € 4 billion to more than € 4 billion, as we accelerated our digital transformation while retail stores were closed due to the coronavirus pandemic. We achieved our target through balancing short-, mid- and long-term opportunities. We took radical actions to focus on digital acceleration by moving available inventory to e-commerce, invested into an agile digital content studio, shifted our marketing and tech budget toward digital and made sure our day-to-day decisions are data-driven with clear focus on consumer insights and trends.
We continued the work toward premium, connected and personalized experiences that enable direct relationships with our consumers. In addition to our adidas e-commerce platform, which is available in over 50 countries, our adidas app strategy continued to fuel our mobile and member focus and has reached over 40 countries across all major markets, achieving a significant share of business in the adidas digital ecosystem. The adidas app is where we amplify our key brand territories such as sustainability and innovation. It is our gateway between online and offline and it provides a premium experience with immersive storytelling, personalized content, frictionless checkout, seamless order tracking, and access to our ‘Creators Club’ membership program. Members collect points from interactions across all our touchpoints (.com, apps, retail stores), climbing up different levels and unlocking rewards including personalized experiences, such as participation into a trivia around sustainability during our first-ever ‘Creators Club’ Week to win a pair of Futurecraft.Loop, our first 100% recyclable performance running shoe. As 2020 saw the highest-ever sports engagement with our adidas Running and Training apps, these apps contribute to amplifying our purpose ‘through sport we have the power to change lives’. adidas is the only sports brand that rewards both physical and purchasing activity through membership points. The success of our Creators Club program is visible in key metrics such as increased consumer satisfaction as well as more than twice as high consumer lifetime value compared to non-members.
In addition to the growth of existing touchpoints, we launched the Confirmed app in August as our new, most premium channel for sneakerheads and style in the US. We expanded the app to China in October. This app brings the best from the brand to our consumers, our most coveted and premium product in the easiest, fairest and most elevated way.
Our more than 2,500 own-retail stores are a vital part of the consumer journey. They are the best place for our consumers to directly interact with our brand, product and teams, and to touch and try our products, feel inspired by our stories and experience what we stand for as a brand. Through premium experiences and the human connection with our teams and communities we aim to build brand loyalty and increase consumer lifetime value. With our fleet of brand flagship stores focusing on premium experiences, concept stores with a more commercial focus and factory outlet stores for the value-seeking consumer, we provide an environment to satisfy all of our consumers’ needs when shopping our product and connecting with the essence of our brand.
In 2020, we focused on ensuring a profitable business through optimizing the store fleet, accelerating digital tools and creating a premium consumer experience. We increased the number of flagship stores and brand centers with a clear focus on digitalization, personalization, and a seamless consumer experience across all touchpoints. At the other end of the scale, we solidified our foundation to shift our factory outlet business from a clearance-focused channel to a commercial engine driving the profitability of the fleet that also showcases our product and brand storytelling.
We made important investments to sharpen the top of the pyramid of our store fleet and strengthen our retail presence in key cities across our markets. In Europe, for example, we extended our flagship fleet by reopening the first-ever adidas Originals flagship store in Berlin and opening a new adidas Originals flagship store on Carnaby Street in London. Our renewed flagship store in Berlin is equipped with a design concept that promotes the store as the go-to destination for sought-after fashion collections and hyperlocal product launches. With the adidas Originals flagship store on Carnaby Street in London, we opened the first-ever gender-neutral store, which will house exclusive product, act as a community space and continue to showcase our strong focus on creating a more sustainable future.
In 2020, the majority of consumers shopped sporting goods in a multi-brand wholesale environment. Wholesale is an important channel for our brand to reach consumers, authenticate and grow key categories for our business. Our main objective in wholesale is to win market share in critical consumer touchpoints on- and offline, especially in key trade zones and high streets. To do so, we identified our most important multi-brand and franchise customers and involved them in range and product development. Through leveraging our strong cross-functional partnerships with key wholesale partners in sales and activation, we see considerable success in landing our products, services, and stories. This is critical to ensure a holistic consumer journey.
We continued our focus on and investments into digital capabilities to team up with our accounts to win online together. Our Partner Program platform brings us one step closer to where the consumer shops by providing strategic partners with unprecedented access to our products by connecting our systems to their digital platforms so they can gain access to our inventory. 2020 saw Partner Program roll out to new partners and locations, enabling us to fill gaps in their size availability and offer an extended range of products to their consumer. Furthermore, our investments into digital capabilities have allowed us to deliver an enhanced and consistent shopping experience in digital wholesale by making our product images and descriptions flow seamlessly into their systems to power their website and app experiences.
We have additionally invested into digitalizing our sales processes. In 2020, we continued our investments into the development of digital commerce tools, such as ‘Click,’ our self-service B2B platform ‘S.Core,’ our sales planning tool, and the ‘Digital Showroom’. In 2020, we went from 40% remote, virtual sell-in to over 90% with ‘Click’ and ‘Digital Showroom’ being rolled out in Europe, Latin America and Emerging Markets. ‘Digital Showroom’ allowed us to design our virtual sell-in meetings in a much more engaging way and even helped to improve our orderbook compared to previous years. Starting in 2021, we will continue to roll out our digital commerce tools to North America and Asia-Pacific to harmonize processes and drive efficiencies while offering a complete service model.
A key ratio in retail business describing the number of buying customers compared to those who entered the store without buying something; i.e. a 25% conversion rate means that 100 persons entered a store with 25 of them buying something.
Creators Club is a membership program that helps us deepen the relationship with our consumers. Linking all adidas apps, events, communities and channels into one single profile, the program rewards members with points for interacting with the brand, e.g. when making a purchase or using the ‘adidas Running’ or ‘adidas Training’ apps. Depending on the number of points, exclusive benefits are unlocked, including access to hype sneaker and apparel drops or invitations to special events.