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Adidas Expects Jump in Cost of Sourcing Products

Adidas reported that due to rising labor and material costs there will be a rise in the cost of sourcing products over the next five years. Adidas plans on raising prices, trimming its product range, and moving production away from China.

The news came at an investor event in Herzogenaurach, Germany, where the Adidas Group shared details on long-term operational development. According to SportsOneSource, the Group sources the vast majority of its products from over 30 countries around the world (SOC).

Adidas Group said that higher input costs and, as Adidas is a globally operating firm, frequently changing exchange rates would sink its gross margin by 50-100 basis points in 2016.

Costs are expected to keep rising by 11-15 percent a year and the price of materials like cotton and nylon could go up 1-4 percent a year according to John McNamara, head of global sourcing.

In order to counteract these cost increases, Adidas will increase orders to Indonesia, Vietnam, Cambodia, and Myanmar (which will account for 4 percent of Adidas shoe production by 2020) and decrease the amount of clothing and shoes it sources from China, according to McNamara.

“We see Myanmar as one of the last great sourcing markets for our type of product,” he said.

To produce around 600 million pairs of shoes and items of clothing and accessories it sells a year, Adidas currently depends on over 1 million workers in contract factories. If you recall, 2014 saw huge strikes in some of the factories that produce Adidas and Nike product.

According to Reuters, on its home soil, Adidas is preparing a German factory that will be run mostly by robots to cut down on labor costs and speed up delivery. The factory will produce the first 500 pairs of running shoes early next year.

To adjust with rising costs, Adidas plans “significant” price jumps in several regions and trimming down of many product ranges.

Let’s keep this news in mind when we shop Adidas in 2016. Thoughts? Share them below.

adidas group

Sources: SportsOneSource / Reuters

5 comments
    1. Happy to see fellow Indonesian on the site..amen to that..that is simply the only reason I restrain myself from buying adidas products nowadays. If you charge USD 220-ish for a pair of shoes that listed USD 140 even on their web, that thing is just pure silly.

      Anw, just wait until it discounted. I just bought my pair of Rose 5 in the FO for IDR 900K (USD 70 ish)..

  1. In the utmost optimistic of views, the price hike may be temporary once automated assembly becomes established. Human intervention will perhaps shift dominantly towards inspection and packing, so they may save on employment payroll while evading the whole slave labor image.

    Otherwise, I think the move of slimming down the product range is inevitable. Almost certain that most people now would rather get a budget Nike item over the Adidas counterpart, if not some PayLess stuff. Adidas can naybe restructure themselves to have more of a higher-end, specialty image with a smaller line. Legit “Made In Germany” (albeit by robots) is going to have some appeal.

  2. I’m not buying it, for 50 years the ‘line’ has been Transport-costs are a big-factor, especially Oil.

    Okay, so the last year we’ve seen the oil-price cut in half…… in Europe we still pay 160 Euro’s for the Rose 6, the Pro Model got renamed(without any real improvement) FutureStar and is now 40 EUR more expensive, and now we’re supposed to believe that sourcing(which is almost all Oil-based in cost) has gotten more expensive?

    This is a 3-Card Monte, a very poorly executed one IMO.

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