Decentralized, Not Uncontrolled
Many global brands work with a decentralized operating model, giving regional teams autonomy to make decisions that are best for their local markets.
The Adidas model is also decentralized, where regional teams make assortment decisions locally with support from the global team. They can also make product creation decisions. CEO Bjørn Gulden wants teams to be market-led, a way to ignite “brand heat”.
The model makes a lot of sense.
In fact, I encourage it. Regional teams know their market, their accounts, and their customers.
But there is a catch here.
Because when regional development happens in isolation and without some level of control, it results in inconsistency, ballooning costs, and commercial risk.
My Merchant Life
When I was the regional merchant lead at Ralph Lauren, I would make assortment decisions for my markets, selecting from the global assortment. Sometimes every option made sense; sometimes it didn’t.
The difference here is that I could not create my own products. Regional product creation didn’t exist. That protects the Ralph Lauren brand DNA.
Adidas is the opposite. Regional teams are encouraged to create their own products on top of assorting from the global line.
Naturally, without constraints, the freedom can get out of control.
The Freedom Tax
Here are the taxes that are paid with regional freedom:
1 – Catering to Wholesale Partners, Not the Market. Wholesale-driven regional teams will design for their accounts versus what is best for the brand and brand DNA.
2 – The Common Thread Becomes Unwound. Every regional product created can create assortment fragmentation, unhinging it from the global line. Added silhouettes, prints, or colors can disconnect from the seasonal concept.
3 – Costs Get Out Of Hand. Sourcing, sampling, and manufacturing costs could go through the roof. Minimums are impossible to hit because of low quantities. Surcharges and shipping costs of smaller quantities inflates cost of goods and hits margins.
4 – The Work Rolls Up to Global HQ. The global team ends up absorbing the workload and vendor management for products that are not guaranteed to sell in local regions. The global teams could waste valuable time on one-off product creation versus innovation that could set them apart from the competition.
Expensive, no doubt.
Controlling the Uncontrollable
In my unique experiences, I find that the following constraints are useful to control the uncontrollable:
1 – Install Material Direction™️. Set the material direction for the season. This identifies the materials allowed to be used to execute the seasonal strategy. Then, allow regional teams to create new products that only use these materials. This will protect the common thread across the brand.
2 – Constrain the Framework. Allow for 20% of regional development that must be approved by the global merch team. More than 1 region must buy into the regional development to help meet minimum order quantities and limit excess/markdowns.
3 – Establish the Non-Negotiables. Globally, DTC and wholesale must buy the global core assortment and key concepts of the fashion assortment. This is what will protect the brand DNA and drive consistency across channels.
No doubt, Adidas is a very successful brand today.
And Gulden isn’t wrong that market-led decisions give global brands a competitive edge in regions.
But they could risk the brand’s momentum by diluting it with products that may not sell.
Controlling the uncontrollable will minimize the chaos and truly drive that brand heat.
