City & Gild: As the economy improves, a new battle between value and volume emerges
What should the consumer make of the recent spat between Adidas and Sports Direct, and how will the unfolding saga affect each brand? At the end of last year, the German sportswear giant refused to supply the retail chain with Chelsea latest replica kit. From my perspective, there will no doubt be some turbulence in the short term, but longer term, from a brand perspective at least, each company is simply reinforcing their position in the marketplace.
Sports Direct’s retail outlets are the closest thing to walking around the internet. One look at their high street offer quickly reveals their approach. Stack it high and sell it cheap. But what’s wrong with that? Consumers don’t expect piped music, plush fittings, or highly skilled staff who have the time or capacity to tend to their every need. They want to buy branded sportswear at discount prices. Goods that will rarely, if ever, see the field of play. The challenge for brand owners though, is that this approach effectively commoditises their offer. It’s the killer of brands.
As we climb out of the recession, companies who seek to charge a premium for their expertise and customer care can reassess strategies which, during the leaner years, were born out of a tactical need to keep volumes high. And such is the case with Adidas. They have placed big bets on properties like the London Olympics and the upcoming Fifa World Cup, spent millions on R&D, and devoted a huge amount of effort to nurture their image as the leading sportswear brand worn by successful sportsmen and women. Flogging their wares through channels that headline daily deals offering 50 per cent off simply doesn’t fit with this proposition.
There is of course, a note of caution. Firstly, a more targeted approach runs the risk of not getting the same reach. Adidas will have to carefully weigh-up the value/volume equation. And secondly, during the lean years, the consumer has emerged a much savvier beast: they now know how little you can buy an Adidas football shirt for. If the brand seeks to control its sales channel in order to deliver a more on-brand experience – and presumably charge more for it – it had better provide the tangible proof for this premium, or else the consumer will cry foul, and Sports Direct becomes their default champion.
If this were to happen, it may well unlock a new future for Sports Direct, who could move from a price-led message to one based on more emotive values. In simplistic terms it would, in effect, go from being a Ryanair to a Virgin Atlantic. And I know which I would prefer to buy from.
Andrew Mulholland is the managing director of strategic branding consultancy The Gild, www.the-gild.com.