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Adidas eyes e-tailing business to protect retailers' margins

Channel partners of various consumer product cos including those in apparel, footwear, phones and electronics are putting more pressure on manufacturers.

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Updated: Aug 27, 2014, 12.10 PM IST
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(This story originally appeared in on Aug 27, 2014)
MUMBAI: Sports footwear and apparel company Adidas Group is pioneering a new online model in India, which would be operational by the year-end. The move is aimed at protecting its trade partners' turf from the rampaging growth of internet shopping sites, and to open up a new channel of growth for itself as well as its retail partners.

At present, the Adidas Group has its own e-commerce businesses in limited markets such as the US and the UK. While there has been a buzz around brick-and-mortar retailers such as Kishore Biyani's Future Retail, Reliance, DLF Brands, and the Birlas looking closely at the online model, there are few examples of any overseas consumer product company using the e-commerce route to garner a higher share of sales.

Meanwhile, channel partners of various consumer product companies — including those in apparel, footwear, phones and consumer electronics — are putting more pressure on manufacturers as their margins come under strain because of heavy discounting by e-commerce players.

"We are working on a closed marketplace model, which would be spearheaded by one of our retailers under the guidance of the company," Erick Haskell, MD, Adidas Group, told TOI.

He also wants all his stores to have a tablet, connecting 80% of its retail universe. So if a product is not available in one city, it can be made available through another shop or city, thereby not losing out on any selling opportunity. He believes it will lead to better inventory management, considering there is varied demand depending on demographics.

The idea of e-commerce came when the company was looking at expansions into the tier 2 and 3 cities but found that a lot of people in these cities order their products through the internet. So, it was a trade-off between store expansion and catering to that segment through another model.

He realizes there is little headroom to manoeuvre since government rules do not allow a foreign company to operate in e-commerce, though most of them get funds from overseas to carry on their business. "We are going to play it very carefully as we don't want to be a brand in a wrong position," he said.

The Indian e-commerce business has been conceptualized and designed keeping in mind the unique consumption habits of the online shopper in India.

"We would, however, continue to sell through online portals such as Flipkart and Amazon directly since we maintain a healthy relationship with them," he said. His only concern is that they shouldn't sell new products at a discount, which their regular retailers object to.

Fashion and lifestyle e-tailers like Myntra, which merged with Flipkart earlier this year, and Jabong have meanwhile already started rolling out exclusive tie-ups with sportswear brands ? one of the big categories in terms of sales for online retailers.

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