The Case of the Adidas and Nike Sneakers Market

Abstract

The past two decades have placed much emphasis on sustainability practices within different industries. In 2017, half of the top 100 fashion brands implemented a sustainable approach in their practices (McKinsey, 2017). Fashion as an industry highlights sustainability as a part of its social and environmental movements. Conversely, emphasis on sustainability from the consumer perspective has been a mainstream issue. Consumers are constantly drawn to companies with clear sustainable practices and products. Yet, companies have constantly fallen short of upholding their socially responsible image in front of the public eye.

Widespread societal concern that firms are disseminating false or ambiguous environmental information has led to a growing number of customers becoming skeptical about the environmental performance and benefits of green products. Previous research has considered how skepticism might have a detrimental effect on consumer responses (Annamma, Sherry, Venkatesh, Wang, & Chan, 2012). Other studies identify several barriers consumers might face when purchasing sustainable products. Therefore, there exists a need for a better understanding of how skepticism affects green purchase behavior (Wunker, 2017).

This study will identify consumer perception barriers of green purchasing behavior and examines the effect of these barriers on CSR practices. Moreover, consumer perception influences consumers’ attitudes towards purchasing. Specifically, this research considers consumer perception on purchasing decisions and word of mouth intention. To set the scope of this study, the target group will be the young consumers (between 18 and 35 years old) who live in The Netherlands and purchase sneakers from Nike and Adidas. A quantitative methodology through questionnaires will be used to collect primary data and the result will be analyzed by SPSS software.

Introduction

Study Background

In the past two decades, business sustainability has gathered much attention from both academics and practitioners across different industries all over the world (Turker & Altuntas, 2014). Whilst the topic has gained much controversy, most businesses consider sustainability essential for their practices. The three dimensions of sustainability have been referred to as the Triple-Bottom-Line, addressing social, economic, and environmental issues (Govindan, Khodaverdi, & Jafarian, 2013). To improve a sustainable business, firms must create Corporate Social Responsibility (CSR) strategies, through designing policies that integrate environmental, social, and ethical rights into business operations.

A company’s association with environmental issues determines its reputation (Caplan, 2003). Due to this fact, more fashion companies are considering sustainability (Choi & Cheng, 2015). Adidas and Nike, for example, have stepped up seriously. Adidas has created a greener supply chain, eliminated plastic bags, and participated in different sustainable projects. Their cooperation with Parley allows Adidas to use recycled ocean plastic and yarn to produce new products (Ismael, 2018). Nike, however, pursues sustainability by reducing the number of toxins released from its production lines.

By using the Considered Index, designers can manage a shoe’s environmental effect throughout the design operation. Adidas introduced the Better Cotton Initiative (BCI) and Plant-Based Footwear (P-BF), in its strategy which increased their CSR perception. In addition, Nike introduced the Footwear Sustainability Index (FSI) and Air-Sole Innovation (ASI) allowing the company to measure the environmental impact of each product (Appendix 1).

These companies have earned large loyal customer bases because of their sustainability efforts (McKinsey, 2017). According to CGS findings, brand loyalty is related to product quality, however, the second-highest reason consumers return to a specific brand is its sustainable practices (Sungchul & Ng, 2011). Thus, fashion companies can fiercely compete in their market by implementing sustainability into their strategy.

Several barriers affect purchasing decisions regarding sustainable products. Skepticism is one of the barriers that hinder consumers from choosing green products in the market (Wunker (2017). Consumer skepticism is defined as “the consumer’s tendency to question any aspect of a firm’s activities” (Morel & Pruyn, 2003, p. 352). Consumer skepticism appears when firms spread ambiguous environmental information regarding the sustainability initiative and environmental performance. A study by Yiridoe, Bonti-Ankomah, and Martin (2005) suggested that consumer’s skepticism on green products appears from mislabeling, misinterpretation, and misrepresentation of green products. Thus, even though consumers may want to buy green products, skepticism about environmental performance may hold them back from doing so.

One essential aspect of CSR is preventing skepticism (Fuentes, 2018). Kwong and Balaji (2016) assert that skepticism harms consumer purchase intentions. Yet, there is a need for a deeper understanding of how skepticism affects the green purchase decision. Fashion firms need to overcome consumer skepticism as it can influence consumers’ purchasing decisions, which can place a company at disadvantage.

Problem Statement

As competition rises among shoemakers (World Trade Organization, 2018), an increasing number of companies tend to adopt sustainability practices. However, a recent study shows that consumers may not be willing to buy green products because of their skepticism (Joshi & Rahman, 2015). According to Bronn and Vrioni (2001), since more firms engage in CSR, consumer skepticism is rising. When consumers doubt the greenness of the company’s products, consumers might shift to other brands or spread negative word of mouth (WOM), which negatively affecting a company’s reputation (Shim & Yang, 2016; Zeynep & Atik, 2015).

According to the latter, firms must change this ‘negative attitude’ in consumer behavior. However, this creates a challenge for fashion companies since their practices need to be communicated to consumers without generating skepticism, specifically in the case of Nike and Adidas.

Research Aim

The purpose of this paper is to study consumers’ perceptions of the sustainability practices of Adidas and Nike. This paper aims to develop insights into how consumers perceive these practices to influence their purchasing behavior. Insights from the ‘suspicion’ of consumers, will aid in the improvement of the CSR practices of footwear companies like Adidas and Nike.

Literature Review

Dimensions of Sustainability

Sustainability is an important issue nowadays for success (Haanaes, 2016). Several global fashion companies introduce sustainable initiatives, including Adidas and Nike (Payseno, 2018). There are three major dimensions of sustainability, which are referred to as the triple bottom line (Govindan et al., 2013; Williams & Millington, 2004). According to a study by Dahlsrud (2008), there are many available definitions of CSR. The definition emphasizes the social, environmental, and economic imperatives, which can be referred to as the triple bottom line approach.

Barriers towards Sustainable Consumption

Nowadays, consumers understand the importance of sustainability, but several barriers affect purchase intention (Bonini & Oppenheim, 2008; Wunker, 2017). Additionally, the study by Joshi and Rahman (2015) mentioned that there is a weak link between consumers’ green attitudes and purchasing behavior, which is referred to as ‘attitude-behavior-gap. Morel and Pruyn (2003) defined consumer skepticism regarding CSR initiatives as “consumer’s tendency to question any aspect of a firm’s CSR activities” (p. 352). In addition, according to Webb and Mohr (1998), skepticism occurs when consumers question and distrust a company’s CSR practice. Thus, an insight into the perception of consumers towards green fashion is necessary to remedy distrust as a barrier.

Distrust and CSR Perception

Since the second half of the 20th century, a long debate on CSR has been taking place, since then firms always mention social responsibility as a part of their sustainable practice (Rosenbaum & Wong, 2015). However, customers fail to determine whether companies pursue this to gain profit or a genuine desire to be sustainable. Skepticism stems from distrust of advertising assertions that organizations make regarding their products (Obermiller & Spangenberg, 2013; Kwong & Balaji, 2016).

According to Morel and Pruyn (2003), distrust relates to skepticism because when consumers are skeptical, they doubt the information of products they intend to purchase. In this case, adverts made by Adidas and Nike are prone to distrust, leading to ‘green skepticism’ on CSR practices. Thus, the theoretical model illustrates that customers’ distrust is a significant predictor of skepticism on CSR practices.

CSR Perception and WOM

The interaction between organizations and customers influences the perception of CSR practices. The dialogic theory holds that effective interaction between organizations and customers creates robust channels of communication, alleviates distrust, and causes the spread of positive WOM (Uysal, 2018). Hence, firms need to diminish the level of distrust and skepticism among customers to prevent the spread of negative WOM about the company’s CSR practices (Servaes & Tamayo, 2013).

According to Wang, Wang, and Wang (2018), word of mouth comprises both negative and positive statements that customers or potential consumers share and influence the perception of products and services offered by companies. Previous studies show that consumer skepticism contributes to the occurrence of negative WOM because it influences attitudes, purchasing intentions, and brand image (Balaji, Khong, & Chong, 2016; Skarmeas & Leonidou, 2013). In this case, consumer skepticism affects the perception of CSR, resulting in the occurrence of negative WOM. As a result, the following alternative hypothesis (H1) was formulated:

• H1: Consumer skepticism on CSR practices is a positive predictor of negative WOM.

CSR Perception and Firm Reputation

Reputation plays a central role in organizations because it determines the impact of marketing strategies. The attribution theory postulates that the way customers perceive, believe, and trust CSR practices influence the reputation of organizations (Chen & Chiu, 2018). According to Kim and Kim (2016), corporate reputation has an intricate link with the perception of CSR practices. In essence, the kind of reputation that companies have in competitive markets relies on the nature of CSR practices espoused. When customers distrust CSR practices, they acquire a negative perception of firms and develop skepticism.

Previous studies found out that consumer skepticism has a negative influence on the way consumers perceive the company’s reputation (Becker-Olsen, Cudmore, & Hill, 2006; Ellen, Webb, & Mohr, 2006; Elving, 2013). Consumers may believe that companies take advantage of CSR practices to increase their profits (Kim & Lee, 2009). Skepticism towards firms’ CSR practices, lead to a deterioration of their corporate reputation (Shim & Yang, 2016). Therefore, the second alternative hypothesis (H2) was formulated:

• H2: Consumer skepticism on CSR practices is a negative predictor of corporate reputation.

CSR and Purchasing Decision

According to Dawson (2006), purchasing behavior comprises attitudes that determine the way consumers choose products, select brands, and undertake their shopping. A purchase decision is the result of each of these factors, and thus, it is useful for firms to collect information regarding consumers’ choices and utilize them to improve their offerings. Dewey (2012) established that the process of purchasing constitutes the following five phases (Figure I). Before making a purchase decision, customers recognize the problem, search for appropriate information, and evaluate available alternatives.

In investigating if consumers are skeptical towards the green sneakers offered by both Adidas and Nike, this study goes a step further from Kwong and Balaji (2016) (Appendix 2). Hence, the following alternative hypothesis (H3) was formulated

• H3: Consumers’ skepticism towards CSR practices affects the purchasing decision of green sneakers.

Conceptual Model

Figure 2 shows the conceptual model that consumers’ distrust influences CSR skepticism, which in turn determines WOM (H1), firms’ reputation (H2), and purchasing decision (H3). The conceptual model indicates that CSR skepticism is the independent variable related to the consumers’ distrust. Being the independent variable, CSR skepticism affects WOM, firms’ reputation, and purchase decisions.

Research Questions

The overall research question is that what is the impact of consumer skepticism regarding CSR practices (of Adidas & Nike) on the consumer’s purchase decision, and the negative WOM intention in the sneakers industry?

Specific research questions in line with hypotheses are:

1. What is the relationship between consumer distrust and their skepticism on CSR practices regarding the sneakers industry?
2. How does consumer skepticism on CSR practices influence the WOM among sneakers consumers?
3. How does consumers’ skepticism towards CSR practices influences firms’ reputation
4. How does consumer skepticism on CSR practices influence the green purchasing behavior in sneakers consumers?

Methodology

Data Collection

This study will follow a quantitative method to study attitudes, behaviors, and other variables from a large sample population (DeFranzo, 2011). Furthermore, a quantitative method will identify the perception of samples on the variable ‘consumer skepticism on CSR practices’, which is linked to the barrier ‘distrust’ from the literature review. The two shoemakers (Adidas and Nike) will be the main focus, with their ‘BCI’, ‘P-BF’, and ‘FSI’, ‘ASI’ sustainability line of green sneakers.

These lines will be tested by consumers in the sneaker segment according to the level of skepticism towards CSR practices, and whether these variables will affect their purchase decision and their WOM intention of green sneakers. A cross-sectional survey will be used to identify these relationships. The survey questions, including multiple-choice questions, will be formulated with an online tool ‘Thesis tools Pro’ and will spread through social media channels and at Dutch Universities.

The questionnaire will be sent to the participants using social media channels with an online tool ‘SurveyMonkey’, and the data can be tested in SPSS software (Collis & Hussey, 2014). This research uses social media platforms such as Facebook messages and WhatsApp as the most used platforms in The Netherlands (Statista, 2019) (Appendix 3).

Population and Sample

The target group in this survey is the young consumers between 18 and 35 years old who live in The Netherlands; however, they can have a different nationality. The age group (between 18 and 35) is more open to change compared to other ages and the most enthusiastic about keeping up with the latest fashion trend (Farsang, 2014). According to demographics, people in the age group 16-35 years consist of approximately 4 million of the current population of the Netherlands (Central Bureau of Statistics, 2018), which is too large to investigate.

With a population of 4 million, a margin of error of 5%, and a confidence interval of 95%, the appropriate sample size should be at least 384 respondents (Jani, 2014). The author will try to reach at least 400 respondents. Participants will be contacted through the random sampling technique. The participants will receive a link to the online questionnaire through social media platforms.

Data Analysis

After cleaning data using the Excel program, the data will be entered into SPSS software to manage the analysis of the survey results. T-test, one-way ANOVA, and multiple regression are inferential statistics that will be used to assess data that will be collected through a questionnaire survey. The demographic variables will be the control variables. These variables will be researched because previous research mentioned that these variables show significant differences in purchasing decisions (Joshi & Rahman, 2015). T-test and one-way ANOVA will be used to analyze the impact of demographics.

Multiple regression will be used to test whether the independent variables affect the dependent variables (Mertler & Reinhart, 2017). By doing this, the author can investigate if the consumers’ skepticism on CSR practices in the sneakers industry influences WOM, firms’ reputation, and green purchase decisions.

Validity and Reliability

To ensure validity, the study will utilize well-designed survey instruments with appropriate questions and scope. According to Trochim, Donnelly, and Arora (2016), researchers should ensure that surveys meet content validity, criterion validity, and construct validity. To achieve content validity, the study will seek expert review of the research instrument before administering it to respondents to ensure that it covers distrust, CSR skepticism, WOM, firms’ reputation, and purchasing behavior. Since there are established instruments that measure variables of interest, the study will correlate them with the designed variables to determine the criterion validity of the research instrument.

The study will also use factor analysis and principal component analysis to evaluate the construct validly Likert items used in the measurement of various variables. Field (2017) explains that factor analysis and principal component analysis eliminate redundant variables and enhance construct validity. Therefore, by ensuring that the research instrument meets content validity, criterion validity, and construct validity, the collected data will have a high level of validity. In sampling, the study will ensure external validity using the random method to eliminate researchers’ bias and survey representative sample size.

To enhance the reliability of the study, the study will test data collected using the designed research instrument. Internal consistency and test-retest are two forms of reliability techniques that the study will use (Field, 2017). The study will use internal consistency in assessing the reliability of Likert items of the key variables of interest. The assessment of the internal consistency using Cronbach’s alpha will check if respondents have a similar understanding of research questions and provide dependable answers.

In the analysis of the internal consistency reliability, the study will use Cronbach’s alpha and consider values that are greater than 0.7 as reliable (Collis & Hussey, 2014). Moreover, Pearson correlation will be used in the evaluation of test-retest reliability. A strong correlation coefficient that is greater than 0.8 will be considered reliable in measuring variables of interest.

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Appendices

Appendix 1: Initiatives from Fashion Companies Adidas and Nike

Adidas

The Better Cotton Initiative (BCI)

In the area of sustainability, Adidas offers various initiatives. Like their involving with the (BCI). (BCI) exists to make global cotton production better for the environment, and for the people who produce it (group B. , 2019). The project aims to improve the social and environmental impact of cotton cultivation worldwide in order to make it more sustainable. It’s a renewable natural resource, but only if producers manage it responsibly. The process of producing organic cotton wastes 90% less water than conventional cotton (group B. , 2019). Adidas has committed to source 100% of cotton across all product categories in all its brands as ‘sustainable cotton’ in 2018 (Adidas Group, 2019). Figure 3: Sustainability of Adidas (Adidas Group, 2019)

Sustainable Product Initiative (P-BF)

The initiative intends to bring Plant-Based Footwear (P-BF) and already launched to the market in 2018. The first shoe ‘made from things that grow’ that has an upper comprised of organic cotton and a base originating from industrially grown corn, which is a non-food source (Adidas Group, 2019). Adidas started to produce sneakers made from 100% organic cotton, a sole made from a corn-based rubber substitute and an insole made from castor bean oil. 75 % of the shoe is made from biological material. The upper is made entirely of the shoe’s namesake cotton, while the sole is made from a corn-derived bio based TPU.

Nike

Footwear Sustainability Index (FSI)

The focus on sustainability at Nike can be recognized by the (FSI) (Nike, 2019). The (FSI) provides scores based on a variety of relevant environmental criteria and forms the basis for how Nike measure the sustainability of products. The index takes into account the energy, water, and chemicals used to make materials. This index provides a way for Nike’s product creation teams to measure the complete environmental profile of each product and make better choices in developing sustainable products. It is also helping teams understand how to improve the sustainability scores of products through using better materials, such as cotton that is recycled, organic cotton materials that require fewer chemicals or less energy in manufacturing.

Air-Sole Innovation (ASI)

Nike introduced the (ASI) in 1979. Nike is investing in the recycling process since then so waste material can be reused to create value. 75 % of all Nike’s shoes now contain some recycled material (Nike, 2018). Recently, the waste material left from Nike’s shoes is being used in tennis courts, athletic tracks, and Nike shoes in order to prevent waste of this material. Furthermore, Nike reuses its shoe materials until they need to be recycled. By reusing these items as much as possible, the company tries to reduce its waste in a way that causes as little damage to the environment as possible (Marc J. Epstein, 2010). Figure 5: Sustainability of Nike (Nike, 2018)

Appendix 2: Skepticism and Green Purchasing

For this research, it is necessary to investigate if consumers in the fashion segment are skeptical towards the green sneakers offered by Adidas and Nike and if this will influence their purchase decision. Consumers skepticism may hurt the results of the company (Elving, 2013). A previous study by Kwong and Balaji (2016) aimed to investigate the role of skepticism in green purchase behavior. This study provides results from a study in which it has been investigated whether skepticism of organic labels influences consumers’ purchasing intentions of organic products. Although the study was limited as it was conducted in Malaysia, it found out that consumers’ skepticism of organic labels has a negative impact on purchase intention, and negatively related to future purchase intentions. Therefore, this research aims to determine whether the ‘green skepticism’ in the sneakers segment is negatively related to the green purchase decision.

Appendix 3: The Usage of Social Media