If you were waiting for your bags at Delhi airport’s T3 terminal any time in early April, you probably didn’t spend much time staring at an empty baggage carousel. Instead, you would have seen large-ish, brightly-coloured cardboard boxes circle past, emblazoned with the Reebok CrossFit logo. “The sport of fitness has arrived,” the boxes announced to bemused passengers. It was an innovative promotion for a new product by Reebok and perhaps the first of its kind at an Indian airport. But that’s not the only reason it stood out — it was also a telling indication of how the sportswear major’s India strategy is changing.
But really, there’s nothing unusual about Reebok’s attempts to stand out in the crowd. Various estimates place the organised market in India for sportswear (which includes shoes and apparel) at ₹3,500-5,000 crore. Reebok, which merged with Adidas in India two years ago, is the unchallenged market leader, with a 46% share -— interestingly, India is the only country where it is ahead of both Adidas and Nike (see: Sportswear circuit). So, the worry for the immediate future isn’t about being toppled from the top but about sustaining the kind of growth the brand has achieved so far.
Brand confusion
That’s because the sportswear market in India is witnessing not so much a brand dilution as brand confusion. There are four top sporting brands, owned by three companies, and there’s very little to differentiate between at least three of them. Puma is the only one that’s managed to carve out a space for itself as a fashion brand for the sports lover with apparel and shoes that show the brand’s fashion credentials more than its sporting ones. The average customer is hardpressed to distinguish between Nike, Reebok and Adidas.
The selling propositions of all three brands have been based on the technology behind the shoe, and while these may mean small differentiation in terms of the user-experience, it is not significant for the average user. In India, especially, shoe technology is often reduced to a forgettable alpha-numeric code or a buzzword like lunar or solar. Customers don’t really care.
Part of the reason is that in India, sports shoes are considered casual attire and the pure sports user is a very small niche. In fact, that’s probably why the market continues to grow: because in India sports shoes can be worn almost every day, almost everywhere. “Growth is not an issue for Reebok,” says Amit Gugnani, senior vice-president, textile and fashion, at retail consultancy Technopak. “But it has to create a niche for itself, which is why Reebok is trying to evolve into a lifestyle brand.”
Brand differentiation is not a problem overseas, where all four brands have distinct positionings and brand images. For instance, internationally, Nike is the market leader and is perceived as a premium, cutting edge brand while Reebok is seen as a women’s fitness brand. “In India everyone is positioned rather hazily,” says Ramanujam Sridhar, CEO of brand consultancy Brand-comm. “Sales grew despite this haziness because the market was growing and income levels were rising. But now the time has come to correct that and give brands strong definition.”
Competing plays
It’s not as if no one is trying. Nike, for instance, positions itself as a performance product to grow its 11% market share. Among its upcoming launches in India is the Nike+ FuelBand, a wristband with an electronic, customisable performance evaluator that tracks and measures everyday movement to motivate people to be more active. The consumer is aware of the differences between brands, believes Avinash Pant, marketing director, Nike India.
“The consumer today has access to all the information that he is seeking on the internet or is talking to trained professionals, etc,” he says. “All this makes the consumer knowledgeable and, more importantly, clear about what he wants while mapping it with what is on offer in the marketplace,” he adds.
The American company is also seeking to build brand loyalty by supporting sports at the grassroots level; the idea is that if you wear a pair of Nikes for soccer practice as a 12-year-old, you’re likely to continue using the brand for several years after. Accordingly, Nike provides training to marathoners through Nike clubs in Mumbai and Bengaluru; it holds a tennis ball cricket tournament for 15-22 year-olds; and is investing in soccer through the Manchester United Premier cup. Pant adds that the brand is also associated with the Mumbai School Sports Association where young athletes across over 550 schools have access to Nike’s products and programmes.
Adidas, on the other hand, got an early edge in brand recall since it signed up Sachin Tendulkar in 1998. But that hasn’t translated into the kind of market share Reebok enjoys and Adidas is often perceived as just a pricier Reebok. The brand is working on gaining a firmer foothold in the market: it is now sourcing close to 40% of its apparel from India, which makes it easier to offer them at a price Indians are comfortable with. The flip side: this is likely to result in some cannibalisation of the Reebok brand, which is part of the Adidas group.
Joint power
In 2006, Adidas acquired Reebok for a whopping 3.1 billion. The idea behind the deal: globally, they were the number two and three brands and together they would take on Nike, the world leader. In India, though, the companies continued to operate as independent entities until 2009 when the integration resulted in Adidas India head Andreas Gellner moving out of the geography. Subhinder Singh Prem, who had been with Reebok since it started in India and had risen to the rank of managing director, was retained as head of the merged entity.
Last month, though, in a sudden announcement Adidas India said that Prem and Vishnu Bhagat, the COO, were leaving the company with immediate effect. While no reason was given for their resignations, the industry is abuzz with rumours of financial mishandling leading to the exit.
Adidas immediately announced the appointment of Claus Heckerott, who was vice-president of finance and global sales in the parent organisation, as Prem’s replacement, which is leading industry observers to speculate on how operations in India will change as a result. Their consensus seems to be that the positioning of both, Adidas and Reebok will be brought more in line with their international counterparts.
That’s because India is an important market for the Germany-headquartered sportswear giant. With the slowdown in Europe and the US, the parent company is looking at Asian markets — barring Japan — to see it through this year. For 2012, Adidas global is counting largely on Asia for its margin growth. It’s also pinning big hopes on Reebok. “…improvements in the retail segment as well as at the Reebok brand will positively influence group gross margin development,” the company stated in its annual report.
Certainly, Reebok in India is more comfortably placed than its rivals. It figured out early on how price-sensitive the market is and, accordingly, positioned itself as an international brand available at reasonable prices. That’s helped Reebok grow steadily in both apparel and shoes (see: Shoe strong).
Even now, its shoes straddle a wide range from ₹1,200 to ₹7,000. The brand has also made sure it’s available easily — there are over 900 Reebok stores across metros, large cities and even semi-urban areas like Bahadurgarh in Haryana and Khammam in Andhra Pradesh. Now, though, it wants to create an identity for itself in the lifestyle category. Hence the focus on fitness, a segment that cuts across gender, age, income and location classifications. “Fitness is a very large market through which Reebok can shift focus to several niche groups like youth, women, etc,” agrees Gugnani.
Sports to fitness
Internationally, Reebok has been built on the ‘fit for life’ platform. In India, though, the fitness market didn’t exist until recently, so the brand was forced to take another route: sport domination. “We dominate cricket like no other brand,” says Sajid Shamim, brand director, Reebok, The Adidas Group. “This is evident through a strong partnership with ICC and three IPL teams. Reebok is also the first sports brand to be associated with Force India Formula One.”
It’s only in the past few years that Reebok India has begun focusing on building its image as a fitness enabler. Sure, the company’s always kept a hand in the fitness game by training fitness instructors — there are about 1,000 Reebok-certified gym instructors today.
But the real emphasis on being seen as a fitness brand (rather than just a sports brand) is more recent. In 2008, Reebok tied up with Cirque du Soleil and introduced fitness trends such as Jukari Fit to Fly and Fit to Flex. Other products like EasyTone and Shapewear were introduced over the next few years.
CrossFit — a strength and conditioning programme that combines weightlifting and gymnastics, kettlebells, sprints and rowing — is an extension of this strategy. The idea is to promote Reebok as a lifestyle brand and attach the brand with various niches of customers. And while Jukari and the other recent launches were targeted more at women, the gender-neutral CrossFit is expected to appeal more to males.
That’s good positioning because the majority of sportswear customers in India are men. “Clearly, Reebok’s research is suggesting that there is a greater awareness of fitness among urban Indians,” says Brand-comm’s Sridhar. “And usually, small town India looks to the metros for trends and aspirations begin from there. The fact that Reebok has such a wide retail network augurs well for these products.”
It’s clear that Reebok is expecting big things from the CrossFit association — perhaps on the scale of the aerobics craze of the 1980s, which, incidentally, it spearheaded. And to ensure that it achieves all its targets, the company is splurging on marketing the programme — the marketing budget for CrossFit is said to be higher than what the company will spend on the IPL this year.
There are no exact numbers available, but in 2011 Reebok had said it was spending around 60% of its annual marketing budget on the IPL and the World Cup and about 80% of the company’s marketing spends last year were solely on cricket-related promotions. So for Reebok to spend more than that on non-cricket activities is proof of how important it is for the company.
The CrossFit partnership was signed internationally in 2011 and rolled out in India a year later. While the programme will help Reebok better reach its customer base of active individuals, it also helps the company open up a new line of products. Later this year, it will start selling Reebok CrossFit apparel and equipment in company stores — that includes kettlebells, gym gloves and workout gear, all of which will be imported.
“If the benefits of the technology are apparent to the consumer the moment they put on the product, we are bound to have loyal customers. This will increase repeat purchases and thus profitability,” says Reebok’s Shamim.
The other part of Reebok’s strategy with CrossFit is its 10-year sponsorship of The CrossFit Games. This annual event, which started in 2007, is growing rapidly and Reebok is betting on it becoming a major event worldwide — the prize money is $1 million. “Our partnership will help to grow the reach of the Games in future,” says Shamim.
“Reebok has also signed some of the world’s top CrossFit athletes to help support them in their training. We are planning CrossFit Games in India and will announce the launch date soon.” Looks like it’s finally fitness first for Reebok India.
