What Does Kanye West Really Mean to Adidas? | 2016 Big-Company Digitization ④

The answer: designer, brand ambassador, the opening shot that ignited sales — almost everything to a company that had spent years hanging its head.

Traditional corporations are still struggling to reach young consumers, while digitization is reshaping supply chains and the competitive landscape from the ground up. QDaily is running a year-end 2016 digitization series — ten articles over one month, focused on what big companies have gained and lost in the digital transition. This is the fourth.

On March 17, 2016, Adidas sold 400,000 pairs of adidas NMD worldwide in a single day. Nike's perennial blockbuster, the AJ 11, sold just one million pairs across all of December 2015 — so this number went a long way toward easing years of Adidas anxiety. Otherwise the company would not have hammered it so hard in its quarterly earnings call.

That day, and those 400,000 pairs, marked a milestone: streetwear culture had rescued Adidas's numbers. In hindsight, it also stands as the clearest illustration of a new model of production, marketing, and release that Adidas has built for the digital age.

That day, more than 2,000 people mobbed the adidas Originals flagship store on Shanghai's West Nanjing Road; many had started queuing the previous noon. The media later wrote up the release as a headline-making "incident" — not only for the chaos on the ground, but because those 1,099-yuan sneakers were flipped for three times that price almost immediately.

Commercial photographer Freddy, who managed to score a pair of gray NMDs, was half a bystander in the frenzy. He had gone that day to shoot the crowd for his client, Adidas — but the scene, which looked "80 percent scalpers," kept getting in the way. "The biggest scalpers in Shanghai each bussed in two or three hundred people." That forced the organizers to scrap the first-come-first-served rule on the spot and switch to a lottery.

Having expected the chaos, Freddy had called in five friends and relatives to enter the draw for him. "Honestly, if I brought my own mom, people would still think she was a scalper."

The same frenzy played out in Berlin, Tokyo, Bangkok, New York, and cities around the world. In New York's Soho on that March 17, Taiwanese actor Li Anglin found himself joining the queue outside the adidas Originals store on a whim — it hadn't been part of his travel plans, but the mood of the crowd pulled him in. "The white mom behind me asked what everyone was lining up for. Once I told her, she joined immediately," Li wrote on his blog afterward. "Walking the streets of Soho, even the air feels fashionable."

Ya Hanxiang, 24, had given up on the in-store lottery from the start. He first asked a friend studying in France to buy a pair for him; worried that wouldn't work out, he also tracked down two scalpers on Weibo — and ended up with three pairs of NMDs from France, Germany, and Russia, spending over 4,000 yuan in all. "Nothing can excite me anymore. I've got every colorway I wanted."

Everyone had lost their minds. This was, in fact, only the second official NMD release, with fifteen new colorways and city-exclusive editions on top of those. After the first generation's whisper-quiet, ultra-limited debut in December 2015, Adidas had sent these Primeknit-upper, Boost-sole fashion runners — with their quirky colored side tabs — to a wave of celebrities: Edison Chen, Kris Wu, Eason Chan, and many more. For months, photos of these stars in NMDs dominated social feeds and the pages of every trend-forward streetwear outlet.

adidas NMD stands for "No Mad." Its designer, Nic Galway — Vice President of Global Design at adidas Originals, and one of the people who knows Kanye West best — is responsible for the Y-3 Qasa, the wildly popular Tubular series, and helped design the Yeezy line as well. With a talent like that behind it, the media was glad to give his new creation generous coverage.

"Adidas content has gotten much more popular on social platforms," said Zhang Long, executive publisher of the sneaker site Longqi and the magazine Digger, in an interview with QDaily.

"If a mighty hurricane were to level Herzogenaurach tomorrow, the thing people would miss most would be our products," Eric Liedtke, the Adidas executive board member in charge of global brands, boasted not long ago. He meant Herzogenaurach, the Bavarian town where the company is based.

This was a confidence Adidas could not have mustered two years earlier. The German sportswear giant had cut its profit guidance again and again, ending 2014 as Germany's worst-performing stock. But since the relaunch of the Stan Smith, Adidas had churned out one hit after another to rescue its results.

Over the past several months, Adidas has released new NMD colorways every other week, with drops of Kanye-designed Yeezy sneakers in between — and all of them sell out the moment they go live. You won't find any of these shoes on the shelves of Adidas's official website, but you can easily find news of the next drop on StockX, Flight Club, Hypebeast, and other streetwear sites.

Like the rest of the fashion industry, sportswear brands have long struggled, in the digital age, to get consumers to discover their products — or better yet, seek them out — and then turn that attention into a purchase. Every sign suggests Adidas has pulled this off with remarkable ease.

The company's comeback has been astonishing: revenue for the first nine months of 2016 grew 20 percent overall, with North America up 31 percent, returning Adidas to second place in the U.S. sportswear market — largely on the strength of adidas Originals. Nike's growth, meanwhile, has slowed noticeably this year. Even though Nike's annual revenue of $37.4 billion is still nearly five times Adidas's, people can feel that the wind has shifted.

Yu Zhengkai runs an online sneaker store called Primary, which ranks around 150th among all sneaker shops on Taobao. He has noticed that the limited Air Jordans that are his shop's bread and butter aren't as hot as they were a few years ago. "The profit has moved. Now you have to switch to regular models for volume." When he goes to competitors' stockrooms to fill orders, he finds that "what used to be mostly AJ has become half AJ, half Adidas."

WZK, a veteran sneaker shop in Shanghai, has hosted several Adidas blockbuster releases over the past year — good publicity for the store, says manager Mike. "NMD moves volume; the good colorways sell out, even the common sizes in standard colors are gone. When Yeezys drop, they sell out on the spot." Yeezy's open-size releases draw foot traffic; NMD has become one of the shop's flagship products, sharing a prominent black display case by the front door with Adidas's performance running shoe, the Ultra Boost.

People come because they've heard the name. That isn't to say the influence of Edison Chen, Kris Wu, and Eason Chan is everywhere. According to Zhang Long, the kind of people who get their information from social media — as opposed to readers of traditional print — have "less brand loyalty, and are simpler, more economical." They chase one trend after another, and many simply buy whatever shoe they've heard is hot, without even knowing which celebrity is attached to it.

Adidas's relationship with its designer and collaborator, the rapper Kanye West, works in almost exactly this way. Some people know the outspoken American musician; some know the Yeezy line he designed; many more have simply heard that the "Coconut shoes" are on fire — with no idea what Yeezy is, let alone who Kanye West is or what his rap sounds like.

Adidas owes much of its standing today to Kanye West — and Kanye, for his part, has asked for rewards to match. After Nike turned down his request for a 5 percent royalty on shoe sales, the rapper, who has 26.4 million Twitter followers, crossed over to Adidas three years ago for a reported $10 million.

You can't escape him in the media or on social media: Kanye West announces a 2020 presidential run; Kanye West releases a music video of nude celebrities; Kanye West publicly asks Facebook's CEO to help pay off his debts.

— "Kanye West's wife, Kim Kardashian, and her family are Hollywood's most gifted attention-seekers." Before every Yeezy drop, paparazzi shots of the Kardashian sisters wearing the shoes inevitably circulate online. In the spring of 2015, Kanye's Yeezy Season 1 with Adidas was hailed as having "the most coveted front row at New York Fashion Week." He even staged the launch of Yeezy Season 3 on the same day he dropped his seventh studio album, The Life of Pablo, wringing out every last bit of hype. Track 19 on that album includes these lines:

Yeezy, Yeezy, Yeezy just jumped over Jumpman Yeezy, Yeezy, Yeezy, they line up for days Nike out here bad, they can't give shit away Yeezy, Yeezy, Yeezy, this is pure luxury

In this context, Kanye West's partnership with Adidas has moved beyond the ordinary celebrity-endorses-brand model. The rapper is not just a spokesman — he is a designer, the opening shot of a sales war, the start button on a cultural moment. To accommodate him, Adidas has stooped lower than ever before, to the point of being mocked as "Kanye's contract manufacturer."

Yet the popularity Kanye West has brought Adidas carries real risk; it spreads like a short-lived viral video. "The retro wave right now, or the Black culture Kanye stands for — we don't know what year it started, and, just like Reebok back in the day, we don't know what year it'll stop being cool," said Digger editor-in-chief Zhang Long, who thinks there's no small amount of luck in riding trendy celebrities. He remembers how, from 2003 to 2006, Reebok signed plenty of excellent stars — including hip-hop godfather Jay-Z and Pharrell Williams, whom Adidas now courts just as eagerly — "but back then the shoes were marked down to three or four hundred yuan in mainland malls and still wouldn't sell."

Adidas's dependence on Kanye leaves a trace of uncertainty over its future. Operating like a streetwear brand also means facing the streetwear brand's perennial problem: its customers are concentrated heavily among young men. Sometimes Zhang Long jokes that he works in a "monk industry."

Yet the collaboration keeps deepening. In July this year the adidas + KANYE WEST venture was announced: Kanye will work more closely with Adidas's in-house design team, and the Yeezy line will eventually get its own standalone stores — 200 worldwide, the first opening in California, where Kanye lives.

A new round of hype has already begun. Kim Kardashian and Ibn Jasper — Kanye's personal barber of twenty years — recently posted, on Snapchat and Instagram respectively, a mysterious Adidas tracksuit bearing the word "Calabasas." Kanye himself has been spotted in the pants again and again in public, apparently teasing a coming release. Adding fuel to the fire, word got out around the same time that Kanye West plans to make a joint album, tentatively titled Calabasas, with fellow superstar rapper Drake. (As an aside: in the U.S., Drake is basically a Nike man — he has a famous rap called "Jumpman.")

At the broadest level: without social media, without this one person, and without his influence on social media, nothing Adidas has today would have been possible.

Nike, by contrast, remains a company that guards its traditional culture. Even when it works with designers, it insists on emphasizing technical performance, and it has never signed anyone who isn't an athlete.

That contradiction has left most longtime sneakerheads, raised on Nike's cultural gospel, genuinely baffled by Adidas's sudden rise — they see the hype shoes as having "no substance," and look down on them a little.

Lewis Chang, owner of the Shanghai streetwear boutique ALL SH, calls himself "a person with a Nike soul." In his view, the kind of person wearing Thom Browne up top and Yeezys down below is "the standard nouveau-riche kit." As for Adidas's celebrity strategy, he asks: "Does it really work to just line up a bunch of famous faces?"

During our interview at his store, Lewis made a point of showing me the shoes on his feet: a pair of Converse All Star 1970s done with Comme des Garçons. "The regular 1970s has this black line on the sole, which is too flashy — I don't like it. This collaboration is the only version without that line; it comes out white on black," he explained, then peeled back a small black sticker on the shoe to reveal the red Comme des Garçons heart underneath. "But that red heart is too loud, so I covered it up."

He picked up the move from Eugene Tong, a Chinese-American fashion stylist. "In Taiwan they call it 'niche cool' — something's cool because other people don't get it. Once everyone's wearing it, it's not cool anymore." For all his reservations about hype product, Lewis doesn't deny Adidas's technical credentials in sport; what bothers him is that the people jumping on the bandwagon don't seem to actually care about the athletic technology. "When Ultra Boost first came out, it wasn't a sensation yet. If Kanye hadn't worn it, how many people would even know about Boost technology? How many would know about Primeknit?"

He's only half-right. As noted above, the six consumers QDaily interviewed who bought at least one pair of Adidas hype shoes in 2016 were mostly Nike fans — and not one of them listens to Kanye's hip-hop.

Ren Jiayuan, a student at Northeastern University in the U.S., is one of them. He now has ten pairs of Adidas sneakers in his closet, most of them snagged on the Adidas U.S. website over the past year.

Buying so many Adidas fashion sneakers at once was partly down to finally having an internship salary, but three other reasons mattered more — two of them being that he'd more or less stopped playing basketball ("Especially after coming to the States — people destroyed me") and that the Boost sole "is genuinely incredibly comfortable."

Stories like this are common. Ya Hanxiang's first pair of Adidas sneakers wasn't an NMD either — it was the Ultra Boost, which he bought for running when he took up the gym last year, on recommendations he read on Zhihu. But he wears those shoes out and to work all the same.

According to data from the U.S. market research firm NPD Group, the athletic market is in an unprecedented spot: sales across the various performance categories are down by high single digits this year, while lifestyle running shoes have grown by nearly half. Real consumer demand is shifting — opening a door for low-tech, fashionable shoes. But by the same logic, brands that can put premium athletic technology into fashion shoes have an even easier time standing out.

The latest news: to sustain its current growth, Adidas has decided to launch versions of the Stan Smith and Superstar with Boost soles (rather than standard rubber) early next year — both perennial sellers in the adidas Originals lineup. This is effectively the same play Nike has been running by putting its Flyknit technology into everything across its range.

The third reason Ren Jiayuan has gotten his hands on so many limited releases is that he has a "dealer friend." Yeezy 350 V2 dropped worldwide on September 24 — but on September 23, Ren had already posted a photo of himself in the pair, now reselling for $878, to his WeChat Moments:

"Asked how to get shoes before the release date — the answer is: stay close to Boss Xia. Today I learned firsthand what it means to be connected."

"Boss Xia" is an old classmate Ren has known for more than a decade, now the biggest sneaker reseller in the Boston market. Of the 128 pairs of Yeezy 350 V2 allotted to Boston for that drop, Boss Xia bought 80 of them, paying a premium, on his own. Foreign media reported earlier that Brooklyn Beckham — David Beckham's eldest son — fell for Yeezys after getting a pair from Kanye as a gift on his 16th birthday, and once asked Boss Xia for a price on a pair of "Red Yeezys," only to pass because they were too expensive.

Even consumers who are wary of manufactured trends and cold to celebrities have been affected. As Adidas keeps putting out shoes in extreme limited runs, the real and sizable profits in the secondary resale market have reshaped even the core sneakerhead community.

We reported not long ago on the past year's changes in this mysterious secondary market — a resale market once packed with limited Jordan retros has been forcefully invaded by Yeezy and NMD. In the most recent quarter, seven of the ten highest average resale prices on the market came from Adidas shoes.

Sports One Source analyst Neil Schwartz described the situation as Adidas's "31 flavors of ice cream" — but here, maybe only vanilla and chocolate are available at the normal price; if you want Mediterranean sea salt, cream and porcini, or strawberry-raspberry, be ready to pay three or four times as much.

"Every time a Yeezy drops in Beijing, the WeChat waiting lists are just — honestly, I don't think buying subsidized housing is any more competitive than this," Zhang Long recalled.

And as the community has grown, it's become something of a love-hate thing for hardcore sneakerheads:

"Subculture always has this tension — on one hand you want your culture accepted by everyone; on the other, once everyone accepts it, you feel like you're not cool anymore." Still, when business is involved, Lewis Chang added: "You'll keep wanting to stock Adidas, because they look good and they sell." Then he turned his own theory back on himself: "Maybe thirty years from now we'll look back and decide we were the ones who got old. Maybe thirty years from now, signing a lineup of entertainment stars really will be the mainstream."

Zhang Long has collected hundreds of pairs of sneakers since high school — not only Nike, but plenty of rare Adidas releases from years past. The change he finds most interesting lately: the Adidas pairs he used to wear out, "only me and my friends in the industry would recognize. But now you wear them out, or post a photo online, and everyone knows what they are."

Thousands upon thousands of trend-chasers have any number of reasons to buy a "must-have." The trend is star-driven, but in the end everyone seems to land on a deeply personal reason: because so many people wear them, because they're comfortable, because they're cool, because they look great — and almost never because a celebrity wore them first.

The athleisure market is heating up sharply right now, and in the future it may well overheat and burst. For Adidas, only one question matters: how long can the good times last?