Authentic local content, grassroots communities, and relevant influencers are captivating Chinese consumers, in stark contrast to generic glamour, international celebrity endorsements, and hyped events in the athletic apparel sector, writes WPICs Jacob Cooke.

2023 has marked a pivotal year in consumer marketing and brand value creation in China. There have been some crucial shifts in consumer and brand behaviour, particularly in the dynamic athletic apparel and footwear sector. A fascinating comparison that illustrates these new trends is the relative performance of On Running and Adidas. On Running has experienced over eight consecutive quarters of substantial growth, while Adidas’ sales are down from three years ago.

Adidas CEO Bjørn Gulden acknowledges the challenge, stating: “We do of course know that our current performance is not good enough”. This statement raises a crucial question: Why have Adidas’ recent brand communications and product developments failed to resonate in China, leading to disappointing financial results?

Adidas in China: A case of missed opportunities

While Adidas management often blames inflation and currency headwinds for their limited revenue growth in Asia, WPIC sees a different picture.

Adidas’ social media and digital marketing campaigns have become fragmented and often irrelevant to Chinese consumers. Once a trendsetter in China’s sports lifestyle, Adidas now seems to lean towards generic product promotions and Western trends, losing its earlier connection with local sport, fitness, and street culture.

Adidas's Little Red Book feed is dominated by OOTDs and collaborations irrelevant to Chinese consumers

Adidas’ social media engagement rates on platforms like Little Red Book (Xiaohongshu) and Douyin lag behind competitors like Nike, New Balance, and notably, On Running. This is a reflection of uninspiring post themes, visuals, and influencer choices. Their focus on “Outfit of the Day” (OOTD) posts and collaborations irrelevant to Chinese consumers has resulted in a meagre average engagement rate of 0.27%.

Localized content: Adidas' Achilles Heel in China

Adidas in China has overlooked the importance of relatable localized content.

Their Chinese campaigns often mirror strategies used by Nike and other luxury brands, neglecting the unique needs and achievements of their Chinese customers and fans. The cancellation of Kanye West’s partnership was also a significant setback given the immense popularity of the Yeezy brand in China.

Current star-studded partnerships and a reliance on past successes like the Gazelle and Samba sneakers come across as predictable and outdated in a market craving fresh, grassroots energy.

Adidas' China campaigns leverage glamorous celebrity endorsements, loud brand collaborations, and classic hits

Despite sponsoring numerous popular Chinese athletes, Adidas has struggled to leverage these partnerships effectively. Their “get to know the athlete” series, featuring basic Q&A sessions in informal settings, has not resonated with audiences. In contrast, Nike’s engaging posts with WNBA star Li Meng (李梦) have achieved engagement rates between 0.44% and 1.05%, dwarfing Adidas’s 0.01%–0.02% range.

On Running's rising success in China

In stark contrast, On Running has emerged as a refreshing force in China’s athletic shoe and apparel markets.

Following its successful US IPO, On Running has invested in communicating its unique brand voice and engineered product features across Chinese social media platforms and local events.

Their community-focused content, showcasing Chinese athletes and local running events, starkly contrasts with Adidas’s approach of reliance on international celebrities for glamorous branding. This marketing strategy has earned On Running an impressive 1.85% average engagement rate on Little Red Book. Their Douyin content, which showcases products in action in realistic settings, has achieved a strong 2.01% engagement rate.

On Running's Little Red Book feed focuses on customer photos and local athletic events

On Running’s success in China is further underscored by financial performance. Their Asia-Pacific sales soared by 71.5% to US$47.3 million in the three months ending September 2022, and by 82% to US$122 million in the first nine months of 2023. Their direct-to-consumer revenues are outpacing traditional retail sales, and their social media fan base and engagement rates in China are rapidly growing.

On Running's China campaigns combine community running events with minimalist luxury brand collaborations

On Running’s standard shoes, typically pricier than Adidas’s, have bolstered their premium status. Their expansion into tennis and hiking, as well as a broader range of apparel and accessories, echoes their success story in China and Asia. Collaborations with luxury brands that emphasize design and lifestyle, such as LOEWE, also resonate well with Chinese consumers, evidenced by a 2.20% engagement rate on Little Red Book.

Lululemon's meteoric growth as a benchmark

On Running has adopted some of the strategies that have propelled Lululemon to over 30% growth in revenue and profitability in China and the Asia-Pacific region. Like On, Lululemon’s success has come from a focus on product quality and cultivating local fan communities over glamour and generic endorsements.

Lululemon’s engaging collaborations and product releases on Chinese social platforms have resonated well with the Chinese audience. Last month, Lululemon hosted its third annual “Wellbeing for All” campaign, a series of online and offline activations including workout classes, livestreamed talks with mental health experts, public art installations, and various community events. The hashtag “Wellbeing for All” was viewed nearly 4 million times on Little Red Book last month. 

Despite a shorter market presence and smaller revenue base compared to Adidas, Lululemon generates comparable buzz on platforms like Little Red Book.

More than any other brand, Lululemon has positioned itself at the center of a lifestyle trend whereby young consumers are prioritizing their mental and physical wellbeing.