Reebok Sports Shoes – Project Proposal

GROUP-1
Dev Karan Nehra – PGP25300
Prem Prakash Dalua – PGP25316
Suresh Sahoo- PGP25334
Sushant Sharma- PGP25335

Objective of the Project

The objective of the project is to figure out ways increase the sales substantially of the
Sports Shoes Brand Reebok (parent company – Adidas Group). The Group is world's second largest
maker of athletic footwear, apparel and equipment by sales (2009) after Nike. Our objective is to
suggest ways so that Adidas Group becomes the market leader.

Approach
The approach for the project would be to start with the basic understanding why Reebok (Adidas) is
perceived as a discount shoe brand and not a premium brand, as in case of NIKE and to an extend
Adidas as a brand. After that we will try figuring out what are the strategies and reasons by which
NIKE has captured the major market share, and where Reebok is lacking. Finally we would suggest
ways which Reebok (Adidas) should take to beat Nike and other smaller players.

Industry Analysis
Market Overview
The Indian footwear market generated total revenues of $3,558.7 million in 2008, representing a
compound annual growth rate (CAGR) of 9.3% for the period spanning 2004-2008.

Clothing, footwear, sportswear and accessories retailers proved the most lucrative distributors for
the Indian footwear market in 2008, generating total revenues of $3,295.2 million, equivalent to
92.6% of the market's overall value.

The performance of the market is forecast to accelerate, with an anticipated CAGR of 10.2% for the
five-year period 2008-2013, which is expected to drive the market to a value of $5,791.4 million by
the end of 2013 an increase of 62.7% since 2008.

The Rise of organised retailing helped the footwear industry as well. Organised retailing chains
helped the marketers to showcase their products properly and also target the premium segment
customer who often visited these newly developed malls and multi brand retail stores. Recession
had less impact on the Indian footwear market as the market was largely dependent on internal
consumption that remained robust.
A lot of players announced plans to open their own retailing stores in 2008. But the most popular
distribution channels remained the multi branding stores and newly established retail malls. The
wholly owned stores provide better margins to footwear makers and also helped them with their
branding needs. International players especially preferred to go solo and open many new wholly
owned distribution channels.

Footwear Brand Shares 2005-2008

% retail value rsp

Brand Company 2005 2006 2007 2008

Bata Bata India Ltd 13.8 13.7 13.5 13.1

Reebok Reebok India Pvt Ltd 3.1 3.8 4.6 5.4
Red Tape Mirza International 5.1 5.2 5.3 5.3
Liberty Liberty Shoes Ltd 4.7 4.7 4.7 4.6
Khadim Khadim India Ltd 3.2 3.4 3.6 3.8
adidas adidas India Marketing 1.5 1.8 2.1 2.4
Pvt Ltd
Relaxo Relaxo Footwear Ltd 2.9 2.7 2.5 2.3
Nike Nike India Pvt Ltd 1.1 1.3 1.5 1.7
Lakhani Lakhani India Ltd 1.3 1.3 1.3 1.3
Metro Metro Shoes Pvt Ltd 1.1 1.1 1.2 1.2
Private label Private Label 36.0 37.0 37.9 39.0
Others 26.1 23.9 21.9 20.1
Total 100.0 100.0 100.0 100.0
Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Footwear industry was fragmented with many national and international players operating in a fast
growing market but none having a substantial market share. Though the demand for footwear is fast
growing in India, 70%-80% of footwear units are still in the unorganised sector. So, to meet growing
demand there is an urgent need to enhance the capabilities of organised segment units. In the same
endeavour, central government during the 10th Plan encouraged development of Footwear
Complexes/Parks.

Future Prospects
In the forecast period footwear is expected to outperform the growth witnessed in the previous
review period. The growth in footwear industry in India will come due to increased incomes of urban
young workers and professionals, growth in organised retailing and increased awareness of global
fashion trends. The footwear market is also likely to benefit from the demand from rural and semi-
urban India in the forecast period due to their economic empowerment.

One of the biggest challenges for footwear in the forecast period is likely to be adaptability. As the
market grows so people will demand newer designs, better quality and increased distribution at
shorter time cycles than before.

Some of the leading footwear players like Adidas, Puma and Nike are likely to channel a part of their
purchase and production from China to India.
Global Market Share of Athletic Footwear
Nike was the clear market leader, with 31% of the global athletic footwear market in 2007, followed
by Adidas and Reebok. The global market for athletic footwear is concentrated, with the top four
firms controlling 71%.

Porter’s Five Forces Model

The footwear market will be analyzed taking footwear retailers as players. The key buyers will be
taken as consumers, and footwear manufacturers as the key suppliers. As footwear is a basic
necessity, and thus involves high sales volumes, buyer power for individual consumers is reduced
considerably. India provides a cheap manufacturing environment suitable to meet the demands of
western retailers for cheaply manufactured goods. This country, therefore, has a high number of
footwear manufacturers with a relative lack of differentiation, which weakens supplier power. Fixed
costs for retail operations are relatively low and new entrants are common.
However, owing to the existence of large established retail groups that wield significant economies
of scale it is difficult for such new entrants to increase in size considerably. Although footwear
retailing is fairly fragmented, the market is dominated by large retail groups between whom there is
a high degree of rivalry.
Competitor Analysis
NIKE
Nike, Inc. is the largest manufacturer of athletic footwear and apparel worldwide by sales; its
revenue in Fiscal Year 2009 totalled just under $19.2 billion. Footwear is Nike's largest product
category, representing 53.7% of the company's revenue. Nike specializes in athletic footwear,
particularly in running, cross-training, basketball, and soccer. Footwear sales increased 14% in 2009,
reaching about $10.3 billion, and accounted for 54% of Nike's 2009 revenue. Much of the growth in
footwear revenue is attributed to the 15% increase in footwear sales in the Asia Pacific region. In
addition to its namesake Nike brand, the company also develops and markets footwear and apparel
products under the Cole Haan, Converse, Hurley International, and Umbro Inc. brand names. Nike
sells its products in over 180 countries worldwide through its company-owned retail stores and
internet sites, as well as through retailers.

Since 2004, Nike has invested 11%-13% of revenue in marketing annually. In 2008 for example,
Nike's advertising costs equalled 12.4% of its revenue. The marketing takes the form of traditional
television and print advertisement, but especially focuses on celebrity athlete endorsements; Nike
sponsors marquee athletes in basketball, golf, soccer, and tennis. In the summer of 2008, Nike's
extensive advertising efforts in the Beijing 2008 Olympics and European Football Championship led
to a 15% surge in the company's 2008 SGA expenses. However, in December of 2009 Nike began to
feel the ill effects of the Tiger Woods scandal, and is considering spending less on sports
sponsorships to avoid similar difficulties in the future.

Since 2001, Nike has captured about 35% of the global market. It is largest in the US, with
recent market shares in the region of 38%. Nike's scale advantage principally manifests itself in low
advertising costs. Scale reduces advertising costs because large brands are inherently recognizable,
and because, with a large distribution network, a dollar spent on advertising improves sales in many
stores. In 2008, Nike spent $2.8 billion on advertising, 12.4% of revenue.
In India, Nike has a market share around 20-25 percent in the sports footwear and apparel
market. Nike is primarily engaged in the design, development and worldwide marketing of footwear,
apparel, equipment and accessory products. Marketing strategy under Nike brand that assumes the
involvement of world top-class athletes and sportsmen in Nike’s ‘Just do it’ advertising campaigns.
PUMA
In recent years, the Puma brand has become synonymous with fashion, style, and sport. Through
fresh design, co-branding and partnerships with celebrities and famous designers, Puma has
elevated their brand image so that it now competes with fashion brands as well as their traditional
rivals in the sporting footwear industry. The Puma brand communication strategy is flexible across
multiple categories, yet communicates innovation for an “active lifestyle”. Puma communicates with
each category in a unique manner, but the tone is unmistakingly tied back to the overall brand
through the overarching brand personality and identity. To extend their brand Puma has created
concept retail stores that enable people to experience the brand in engaging and compelling ways.
Puma also engages customers through their Mongolian barbeque concept that enables customers to
design and build their own footwear from scratch. Further differentiating the brand from traditional
rivals, Puma frequently hosts promotional events that are based around “active lifestyle” themes
based on dining, entertainment, fashion, and music.

Current Brand Differentiation

Reason for Being

Mixing the influences of sports, lifestyle, and fashion

Value Proposition
Fits your active lifestyle

Reasons to Believe
- Distinctive trend setting styles
- Branded retail experiences (concept stores)
- Co-developed celebrity lines (Turlington / Nuala)
- Co branding partnerships (Ferrari,
- Partnerships with famous designers (Starck, Wanders)
- Mass customization (mongolian bbq)
- Promotional events (beats & treats)

Persona
Elegant, colorful, fresh, spontaneous, individual,
metropolitan, international

Associations
Fashion brands (Gucci, Armani, Dolce Gabbana)
Fringe / extreme sports
Music artists & movie stars

Range of Authority
Performance & casual footwear
Apparel & accessories

Audience
Anyone who leads an active lifestyle

Puma Brand Portfolio

Puma India Business

Barely four years into Indian operations, sports lifestyle company Puma has set up 80 stores in the
country and is scouting for opportunities to further expand its reach into Tier II and III cities apart
from metros.
Half of the stores are company-owned and the rest are franchisee operated. In its strategy to make
Puma a popular brand in India Puma has tied up with Rajasthan Royals. They have specifically set-
up a website and a separate branding for its cricket related products. This brings in a good image in
the minds of Indian consumer for a majority of whom cricket is a religion.
POWER
Power is a Bata International Brand, which continues to spark an emotional connection with
the masses by providing athletic footwear at very affordable prices. First launched in 1972, it
has created a niche for itself in the sports segment

Power Slogan: Be Smart

POWER is inspired by the same passion to perform that is inherent in the athletes
who use our products. POWER as a brand stands for Durability, Trends, Responsiveness,
Performance and value.

Power offers a Sporty range of basic as well as performance -oriented shoes at unbeatable
prices. It's the Right Match for your active life style – be it Jogging, Running, Adventure,
Cricket, Badminton, Tennis and lifestyle. Power products are equipped with unique features
and benefits that differentiate Power footwear from competitors, provide professional
services to our customers and ensure the Right products are delivered in the Right time in
the Right price.

SPARX
Sparx is a brand from Relaxo Footwears which is India's second largest footwear company. The
company which started its operations in 1976 is famous for its Hawaii slippers. Relaxo footwears
have a turnover of around Rs 400 crores.

Sparx is the foray of the company into the high end sports shoe market . The sports shoe market is
worth around Rs 400 crore and is expected to grow very fast owing to the changing lifestyle and
demography.

The Indian sports shoe market is now dominated by global icons. It is true that in the Rs 10,000 crore
Indian footwear market, there is plenty of space of various brands and Sparx is aiming for the same
segment that the global icons are fighting for.

Sparx is relying on the celebrity power to position itself as a premium sports shoe brand. The brand
is using the Bollywood hero Neil Nitin Mukesh as the brand ambassador. Sparx has adopted the ad
slogan “Add Sparx to your life" and the brand has the tagline “Go for It" . The brand could have
added some more imagination while selecting the taglines.
The ad which looks nice, definitely gives the brand a premium look. But there is no big idea. The
theme is old and often used by lot of brands in the past. There is neither positioning nor a
differentiation. What the ad generates is a fair amount of brand familiarity.

The question is whether brand familiarity is enough to generate sales. To a certain extent it helps.
Shoes are an experiential product. Sparx needs to offer a compelling reason for the consumer to
reject Nike or Adidas and go for this brand (assuming that Sparx is aiming at that segment). If the
brand is looking at a segment that cannot afford global brands like Nike, then the current strategy
works. Sparx brand is priced around Rs 1300-1500 range but the problem is that with a little more
money consumers can trade up to a Reebok or a Nike.

That calls for a serious look at the marketing basics of Positioning and Differentiation.
Sparx is a brand from a very established footwear maker. It has the resources and the reach which
are essential pre-requisites for success in the Indian market. The brand has evoked lot of curiosity
with its association with the celebrity. Its success will depend a lot on how it takes the
communication from curiosity to engagement.

Internal Analysis: Reebok

Reebok International Limited, a subsidiary of German sportswear giant Adidas, is a producer of
athletic footwear, apparel, and accessories. Reebok is an American-inspired, global brand that
creates and markets sports and lifestyle products built upon a strong heritage and authenticity in
sports, fitness and women’s categories. The brand is committed to designing products and marketing
programs that reflect creativity and the desire to constantly challenge the status quo.
Reebok India commands a 51% market share in the premium sportswear industry. It plans to
increase the store count from the existing 500 to over 600 before the next financial year. Reebok
reaches out to its target customers through its 500 exclusive Reebok Stores, 200 Shop in the shop
outlets & 2500 dealer outlets. It offers different segments for both men and women like sports and
fitness footwear, apparel, accessories, fitness equipment and the lifestyle section.

Taking retail to new heights, Reebok’s new store offers the finest shopping ambience to customers
with products displayed by categories such as ‘Running’, ‘Walking’, ‘Aerobics’, ‘Tennis’, ‘Cricket’ and
‘Lifestyle’, to help customers make better purchase decisions. Reebok started its operations in India
in 1995. Reebok India has a pan-India presence with branch offices in Mumbai, Kolkata and
Bangalore and ranks at the top amongst international footwear companies in India. The Company's
brand vision is fulfilling potential, its mission – Always challenge and lead through creativity.
Reebok’s positioning is to celebrate individuality in sports and life.

Reebok has dominated the Indian sportswear market. While its major competitors Adidas (as Brand)
and Nike have not been as successful in the Indian market, Reebok claims it will end 2005 with total
sales exceeding $91 million. Sales in 2004 were $59 million. In contrast, according to market sources,
Adidas India’s sales revenues are about $22 million.

Reebok's main advantage has been that it understood the Indian consumer very well and has made
an effort to grow alongside him. For instance, when the company came to India, all that the
consumers wanted was an international brand of footwear and Reebok gave them that at an
affordable price. One aspect to Reebok's success has been its ubiquitous retail chain. By the end of
2005, the company was retailing from 182 franchised stores. It also retails from two thousand multi-
brand outlets.

References:
 http://corporate.reebok.com/en/about_reebok/default.asp
 http://en.wikipedia.org/wiki/Nike,_Inc.
 http://www.puma.com/?language=en&lang=DE
 http://www.bata.in/
 Datamonitor sources