Adidas Shoots for 20 Percent of the Israeli Sporting Goods Market

At an event studded with soccer players, Adidas last week inaugurated its new showroom in Holon - the cornerstone of the growth strategy designed to increase the company's market share in Israel by 50 percent in the next few years.

The event was attended by Adidas regional manager, Osman Ayaz, the energetic and smiling man who decided about a year ago to go against Adidas' practice around the world and close the Adidas representation, handing the company's marketing activities to a local franchisee, Life Sport, which is managed by Shalom Moliov. At about the same time Nike, Adidas' biggest competitor, decided to do just the opposite, opening a representation here and ending its long-standing relationship with franchisee Ruson Agencies.

Ayaz, who is Turkish, is responsible for Adidas' activities in Israel, Cyprus, Turkey and the Balkan countries. He explains that the decision to close the local representation followed its failure to increase the company's market share to levels comparable with other countries worldwide.

"There was a lot of motivation, but it was not translated into action," says Ayaz, "so we decided to find an industrious local distributor."

Big hope is Ben-Gurion 2000

Ayaz notes that his decision has paid off. "Life Sport has managed to double the number of Adidas sales points in Israel and the number of models sold here," he says.

In addition to the plans to open new Adidas stores and to expand cooperation with leading sports retailers in Israel, Ayaz is hanging his big hopes on the duty-free store at the Ben Gurion 2000 terminal. James Richardson and MGS (a Life Sport sister company) won the tender for the concession to operate the sporting goods store at the new terminal.

The new store, which has an area of about 750 square meters will have a large Adidas section, a kind of store within a store. Adidas will be investing 100,000 euros in this outlet, which will showcase the company's new products and best-selling items. The current sporting goods store at Ben-Gurion Airport is run by Sakal, and the Adidas section there is relatively small.

Moliov's growth targets are quite ambitions. He says he wants to increase Adidas' share of the Israeli sporting goods market (footwear, clothing and equipment) from its current level of 14 percent to 20 percent.

Moliov estimates annual sales in the Israeli sporting goods market at about NIS 2 billion, and says that footwear for sports accounts for about 65 percent of this figure (NIS 1.3 billion). The biggest player in the market is Nike, with a market share of 22 percent, followed by New Balance (18 percent), Diadora (17 percent) and Puma (7 percent).

Moliov is no newcomer to the Israeli sporting goods world. Along with his brother Gideon, he owns MGS, which has been importing Diadora, Converse, Skechers and Arena brands for years. Life Sport was established specifically to win the Adidas tender. Now Gideon and Shalom each run a separate company, but they join forces in big projects such as the tender for the concession to operate the sporting goods store at Ben-Gurion 2000.

Sponsoring soccer stars

Ayaz knew Gideon even before he joined Adidas, when he worked for a company that distributed sporting goods brands in Turkey, including Arena. Hence when Ayaz decided to seek a local distributor for Adidas in Israel, he examined several possibilities, with the first one being the offer from his friends at MGS.

To increase sales, Shalom is planning to invest heavily in opening more stores and in advertising, as well as sponsoring leading players, mainly in soccer, like Giovanni Rosso, Avi Nimni and Haim Revivo, all of whom attended the official opening of the showroom last week. Adidas now has two stores in Israel; the surplus store in Holon and the stylish and well-designed store on Shenkin St. in Tel Aviv, which opened a few weeks ago.

Moliov says that Life Sport is planning to open similar stores in the major shopping malls - Azrieli, Ramat Aviv and Grand Canyon. At the same time, three more surplus stores will be opened in Afula, Modi'in and Ashkelon.

Ayaz says Adidas' retail strategy is based on three types of stores: performance - sporting goods stores that offer Adidas' new and advanced collections of footwear, equipment and clothing; heritage - Adidas classic collections, including footwear, sweat suits from the 1970s, which are currently enjoying a revival as fashion items; and surplus stores.

In Israel, it was decided to combine the sporting goods and fashion stores under one roof. Adidas is well aware of the power of mass advertising in the frenetic and fickle sports world, so it has decided to allocate relatively large sums for advertising in 2004. In April Adidas international campaign will reach Israel, with the slogan, "Nothing is Impossible." The campaign, produced by the TBWA advertising agency, stars soccer player David Beckham and basketball player Tracy McGrady and includes boxing clips of Muhammad Ali.

Adidas' Israeli media purchasing budget is about $250,000 and will be handled by Karat Israel. There will be another campaign with a similar budget this summer, prior to the European soccer championships and the Olympic Games in Greece. Moliov feels it is important to strengthen the fashion value of Adidas, so the company sponsored the Miss Israel beauty pageant that was broadcast Monday on Channel 2.