Every household has at some point had an argument over which shoe apparel company is the best and which dominates the other. However over the years, both the US and German sports labels have maintained two recognizable brands around the world. Yes, financially Nike is known to be much larger than Adidas, but the latter’s performance has been better over recent years. The article below will explain to you what has been different between the two companies so far, what in store for them in the future and will help you choose your pick.
A Brief History Of Adidas And Nike
Adidas is the largest sportswear manufacturer in Europe and the second largest in the world after Nike. Formerly known as “The Dassler Brothers Shoe Factory”, the company was founded by Adolf Dassler and Rudolf Dassler in 1924. The founders being sport enthusiasts began to make sport oriented shoes that could improves the performance of the athletes in any sport. Later in 1949, the two brothers broke their relationship which led to the creation of Adidas by Adolf Dassler and PUMA by Rudolf making them the biggest business rival at that time. Adidas was named after the initials of Adolf Dasslers while the logo of three stripes was taken on as a shoe design on the company’s shoes for better comfort. With their logo “Impossible is nothing.”
Nike is an American multinational company that is the world’s largest athletic shoes and apparel manufacturer and supplier. Originally known as “Blue Ribbon Sports” it was founded by Bill Bowerman and Phill Knight who was a track athlete in 1964 before becoming Nike in 1971. The name was taken from Nike, the Greek goddess of victory. The company was first made as a distributor for a Japanese shoemaker Onitsuka Tiger. Bowerman then made his first shoe for Otis Davis who later went on to win two Olympic gold medals in 1960.
Blue Ribbons Sports sold 1300 pairs of Japanese running shoes with a gross of $8000. While its first advertisement gave its tag name as “there is no finish line” which was changed to “Just do it” in 1988. Today in 2014, Nike was valued at $19 Million and thus became the number one brand in the sports business.
Business model of Adidas and Nike
Adidas - In 2017, Adidas made an annual revenue of 21 billion euros and a brand value of seven billion US dollars. In the same year, Adidas employed 5,888 people worldwide and generated 50% of its sales in the footwear category. Adidas is much smaller than Nike in the terms of what its customers are looking for and trying to find a bigger audience in North America.
Nike - When it comes to Nike is the most valuable sports brand in the world and especially in the North America. Unlike Adidas, Nike's first target audience is the people North America and they also have a strong marketing and sponsorship agreements to back it. Making it the reason behind Nike getting 30.57 billion euros in revenue in 2017. In 2006, however Nike was still the leading with 13.44 million euros while Adidas made 10.08 billion euros. In 2015, Nike also won the bet against Adidas and became the next exclusive provider of uniforms to the NBA.
Quality vs. Quality
Adidas - Adidas always believes in putting quality over quantity and gives more importance to customer satisfaction. Adidas talks to many athletes on their preference and comfort to then implement it into their design. This was the reason for them to innovate Boost technology which is an innovative cushion technology that includes a TPU (Thermoplastic Polyurethane) that compresses under pressure. This instantly bouncing back to its original form and in shock prevention which helps the athlete in a more consistent run. Some of famous shoes made by Adidas are Y-3 collection, Ultra boost, Gazelle, Supernova, etc.
Nike - Nike does make more business than Adidas but the customer reviews have deteriorated and there has been no innovation that has been as big as Yeezys which is under Adidas. In 2013, Kanye left Nike and joined Adidas to then go on to create the Yeezys which despite being expensive sold out as soon as it hit the markets. This makes us think of whether Nike is going to up with something new or if tables will turn in favor of Adidas.
These brands not only sell their products but also give people an inspiration for higher standard of living and a lifestyle, appealing to diverse market segments through products such as the Nike Pro Hijab or the Adidas Ocean Plastic sneakers. Adidas now has more funds that are used for towards advertising and introducing new brand ambassadors from around the world, securing the brand’s cultural impact.
Nike on the other hand was known to put out advertisements that propagate the message of fighting against yourself in order to achieve constant growth.Now however, the brand has shifted its attention to promoting Muslim athletes and the LGBTQ community through projects such as the Nike Pro Hijab, and the equality campaign.
Adidas reached a milestone last year by pushing its gross margin over 50% threshold while Nike has had a harder time dealing with margins as of late. When it comes to the revenue, Nike has a bigger business overall and is the market leader in the sports brands with the revenue from their footwear reaching $24.2 billion in 2018, which compared to Adidas footwear revenue which is $15 billion in the same year.
|Brand (2017)||Revenue||Net Result||Gross Profit Margin||Employees|
|Nike||28.7 billion||1,468 million||43.5%||74,400|
|Adidas||21.2 billion||1,173 million||50.4%||56,888|
|Puma||4.14 billion||136 million||47.3%||11,389|
|Under Armour||4.07 billion||-39 million||45.0%||15,800|
These figures include not only Nike and Adidas branded footwear but also converse which is owned by Nike and Reebok owned by Adidas. In terms of revenue growth, Adidas footwear has added $4.3 billion at an average rate of 6.8%. In the scale of both the businesses, Nikes market capitalization as of July 2019 stood at $140 million way more than Adidas which got $65 million. Adidas is growing with strong share price performance while Nikes been growing with industry performance.
Production and Suppliers
Both Nike and Adidas source the vast majority of production done from Asia. But Nike has more production done in America whereas Adidas has more facilities in Europe. Africa also forms a tiny portion of overall manufacturing for both companies. Nike has about 554 factories over 4 countries supplying it with footwear, apparel and equipment. Chinese manufactures supply 23% of all Nikes production while Vietnam contributes 16% of Nikes total production which mostly constitutes to creating apparel and footwear. Adidas however, has over 800 factories in 55 different countries. Vietnam produces 44% of all Adidas footwear, followed by Indonesia at 25% and China at 19%.
The cool factor here refers on the collaboration with music and celebrities or other influencers. Adidas seem to be winning in this category as its athleisure collaborations with Kanye west and Beyoncé as compared to Nike more sports focused approach. With the athleisure becoming a new trend Adidas is trying to win the market by this approach. Kanye west is the best example of this because with the help of Adidas he has now built a billion dollar Fashion Empire through his sneaker brand Yeezy.
Whereas Nike main collaboration till now has been with the basketball veteran Michael Jordan whose Air Jordan line of trainers for nike holds the top spot for celerity sneaker brands generating more than $3 billion in sales every year. But the first jordans were launched in 1985 which is why it has lost its cool factor. The Celebrities that support Adidas are David Beckham, Pharell, Novak Djokovik while Nikes supporters are Drake, Roger Federer, Cristiano Ronaldo, etc.
Sports sponsorship has been the main activity of both the companies and have a history of being a part of numerous famous sport events. Nike is known to be the main provider of apparel, footwear and uniforms of NBA league most of the times. In 2018 however, Adidas sponsored way more than Nike in the Football world cup. Where 12 teams wore the brand Adidas, 10 teams signed up for Nike. Adidas boasts the current World Cup holders Germany, along with Argentina, Spain, Belgium, Colombia, Egypt, Iran, Japan, Mexico, Morocco, Russia, and Sweden. Both the Companies have always competing on who will get to sponsor more teams especially in events like the FIFA World Cup, Olympics and NBA basketball games.
Future plans for Adidas and Nike
Both Adidas and Nike have performed exceptionally well in the past few years and have reached their highest financial record in the year of 2017. Adidas and Nike are now looking forward to grow their companies, their revenues and earnings and spread across the world in the coming years. Nike in particular is focusing on higher growth in China while, Adidas is looking get a larger audience in North America. They also look forward to digitally transform their businesses, Nike is looking for new materials for its products and Adidas is concentrating on their designs by opening up its brand to their customers and other designers.