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Adidas looks to repurpose Yeezy merchandise amid financial blow : NPR


An Adidas store in Manhattan on October 25, 2022, in New York City. The company is facing huge losses after ending its relationship with Kanye West.

Image of Spencer Platt/Getty


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Image of Spencer Platt/Getty


An Adidas store in Manhattan on October 25, 2022, in New York City. The company is facing huge losses after ending its relationship with Kanye West.

Image of Spencer Platt/Getty

When Adidas severed ties with Ye, formerly known as Kanye West, because of the rapper’s objectionable remarks, the sportswear giant quickly ran into another problem: what to do with all the related merchandise. related to Ye, branded Yeezy.

Adidas said it stopped production of Yeezy products as well as payments to Ye and his companies in October – adding that the German company does not tolerate anti-Semitism or other types of hate speech.

But the breakup came at a significant price for the brand.

in one Scenes of profit Issued on Thursday, Adidas said the decision not to sell existing merchandise is expected to reduce the company’s full-year revenue by 1.2 billion euros (about $1.28 billion) and operating profit. of the company is 500 million euros ($533 million) this year.

The loss could be even greater if the company decides not to “reuse” any of its unsold Yeezy items.

Getting rid of unwanted, leftover products or finding ways to reuse them is a common problem for the retail industry. Reselling inventory at a discounted price, donating or recycling are different options companies consider.

Experts say Adidas is in a particularly difficult position in trying to profit from unsold inventory due to the distinct design of Yeezy products and the reputational damage caused by designer Yeezy. cause.

“There is no way out of this situation lightly or profitably,” said Matt Powell, a footwear retail expert who has worked with Adidas. “The question is, how can they mitigate the bad things that are about to happen?”

Here are a few options of what Adidas can do with its unsold Yeezy products:

Remove the Yeezy label and resell merchandise at a discounted price at its own stores in the US

One option for Adidas is to remove the Yeezy identification labels and attempt to resell the inventory at their own stores and their retail partners for a discount. That strategy may be Adidas’ best bet for profitability, Powell said, but repackaging the merchandise comes with its own set of challenges.

“All of this work is extremely laborious and can only make one shoe at a time,” he says. “So it’s very expensive to go through this process.”

The Yeezy line is also difficult to innovate because of its distinct design.

Consider the sponge running shoe — a futuristic loafer with sculptural lines and monochromatic finishes. Adidas may try to sell its own version of the foam running shoe, but consumers may still associate the shoe with their previous designer.

“Will consumers buy it? That remains to be seen,” Powell said. “That’s where the biggest question mark of all of this is.”

Sell ​​Yeezy merchandise in smaller markets outside the US

In general, repurposing products at a deep discount can have consequences for a brand’s reputation. So companies look to smaller markets, possibly in developing countries, to make a profit without damaging their image in large consumer markets like the US and Europe. .

Marshall Fisher, a professor at the Wharton School of the University of Pennsylvania who studies retail operations and supply chain management, said Adidas may have better luck selling the Yeezy line in smaller markets.

Fisher, who worked with Nike, told NPR.

He added that getting rid of the Yeezy labels will still be crucial to this strategy, and there is still a chance that smaller markets may not be interested in discounted products due to its reputation.

Experts say that destroying goods is not a smart move

While reusing comes with its own risks, retail experts say disposing of unsold items is not a “viable strategy” — not only because of the financial loss, but also because of the financial loss. may also cause a violent reaction.

Companies like Burberry, Coach and H&M have come under heavy criticism in previous years for throwing away wearable clothing.

“We’ve seen that happen with other luxury brands who don’t want to see their products discounted at the end of the season,” Powell said.

On the other hand, Fisher said donating merchandise is “much better for reputation and sustainability” and that it would be a viable option for Adidas should it decide not to make a profit.

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