Adidas gets govt nod to open 100% foreign owned stores in India

New Delhi: Germany’s Adidas AG, which sells Adidas and Reebok sports shoes and clothes in India through local distributors, will open its first company-owned outlets in the country in the second half of 2016.

It has received government approval to open 100% foreign-owned stores in India, Dave Thomas, managing director, Adidas Group India, said in a statement on Tuesday.

Adidas had submitted its application in July to the department of industrial policy and promotion (DIPP) seeking approval for foreign investment of up to 100% for retail trading of Adidas-branded products and its variants. It plans to open large stores in India like it has in other major markets.

Over a period, Adidas will introduce its own large stores in India, Thomas said, adding that the company would continue to operate franchisee-owned outlets. “Own retail channel plus e-commerce channel complemented by our franchise network will drive growth for our brands and our business in India,” he added.

Adidas, among the first foreign sports brands to enter India in 1995, operates 760 stores through franchisees. Of this, nearly 500 outlets sell only Adidas. “We would like to take this number up to 1,000 stores by 2020,” Thomas said, adding the company would focus on profitability in India.

“We strongly believe own retail will enable us to take our market leadership position to an even higher level. It will give us additional flexibility to bring in global concepts across all categories in larger stores, thereby enabling us to further enhance the premium experience for our consumers,” Thomas said.

According to its filings with Registrar of Companies (RoC), Adidas had sales of Rs.737.5 crore and Reebok Rs.324.2 crore in the year ended March 2014.

In 2013-14, the company had shut down the majority of its Reebok stores following an alleged Rs.870 crore fraud by Reebok India’s former managing director Subhinder Singh Prem and chief operating officer Vishnu Bhagat.

India permitted 100% FDI in single-brand retail with riders in September 2012, including a mandatory 30% local sourcing requirement.

Adidas is the first sports shoe company to get DIPP permission for 100% FDI. Rival Nike had submitted a similar application on 29 August last year, but it was rejected.

Several single-brand retailers, including furniture maker Ikea AB and clothing brand Hennes and Mauritz have since applied to enter India.

In India, Adidas competes with Nike, which entered the market in 1996 (it set up its Indian subsidiary only in 2004), and Puma that came to India in 2005.

The active sportswear market in India, including sports footwear, apparel and accessories, is estimated at Rs.6,000 crore, growing at 13% year-on-year, according to a report titled Sportswear market in India 2015 by retail consulting firm IMAGES F&R Research.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.