Tajuk : Nike and Adidas are making huge investments that should terrify Under Armour
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Nike and Adidas are making huge investments that should terrify Under Armour
Adidas/Instagram
The future will be owned by those who get there first.
Nike and Adidas, the two biggest global sportswear companies in the world, have a new focus on speed. The two companies have been throwing their weight behind initiatives to speed up the supply line and react more quickly to changes in style and fashion, according to a new research report by Morgan Stanley Research.
The researchers note that online shopping has created an environment where people want to buy things and wear them as soon as possible, and that new fashions are being cycled through at a faster pace than before because of social media.
Adidas has reacted to this strongly, with 80% of Adidas’ sales in 2016 from products that were less than a year old. Adidas’s products are very on-trend, which is contributing to a staggering run of growth, especially in the US where it is growing much faster than a sluggish Nike and an even slower Under Armour.
In order to better react to chasing trends, Adidas is looking to create a “flexible” supply chain, Adidas’s North American head Mark King told Business Insider.
The two keys to sustaining interest for Adidas is staying “very connected to the consumer” and acting “with speed to bring products to the market place that are really relevant in the moment,” King said.
Both Nike and Adidas have increased capital spending, and Morgan Stanley estimates Nike spent “~$2.5 billion on research and development in the last five years.”
Under Armour has lagged behind Nike and Adidas in innovation. Shares have declined 45% in the past year, compared with Nike staying flat and Adidas gaining 30%.
Pier Marco Tacca/Getty Images
The bank estimates that in these automation and digitization can shorten the lead times from “12-18 months to 4-6 months.”
“Innovations will align inventory management with actual demand,” the note says.
Because of this speed up pipeline, Morgan Stanley is predicting faster growth, more sales, and higher stock prices for Nike and Adidas, which can out-muscle other, smaller players in the market such as Under Armour.
This will track an increase in worldwide athletic wear sales that is predicted to continue, and as the the supply chain gets faster and more flexible, this will allow for more full-price selling with higher margins.
It’s not all bad news for Under Armour however. Though CEO Kevin Plank has emphasized that Under Armour will need to focus on speed, they are behind “first movers” Nike and Adidas in their initiatives.
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Read more stories on Business Insider, Malaysian edition of the world’s fastest-growing business and technology news website.
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