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Adidas takes on Nike in fight for China's sportswear crown

China's sportswear industry is saturated, with both local and global players grappling for a larger slice of what is a $22 billion-and-growing pie. The key to winning, Adidas' Greater China boss says, is knowing what Chinese customers want from their sportswear.

Colin Currie, managing director of Adidas Group Greater China, says it's critical for the sportswear brand to understand the Chinese consumer "whether they're in the north or the south or in different provinces."

"[We ask] what do they actually need from a sports brand, what inspires them to do sports and to participate in sports?" Currie tells CNBC's Managing Asia. "I think we've cracked that."

Currie says that the company has learned through discussions with consumers that because people in lower-tier cities have less disposable income than their peers in high-tier cities, "when they buy sportswear, they want to buy sportswear for multiple occasions."

"They want a versatile piece of footwear, or they want apparel they can do sports in but also go to social occasions in," he says. "You know in lower-tier cities, it's okay to go to a wedding or to work in Adidas, it's actually acceptable."

Currie expects the healthier, more active lifestyle seen in tier-one and tier-two cities to eventually trickle down to the lower-tier cities, resulting in increased demand. Anticipating that change, Adidas has opened an estimated 500 new stores in China each year over the past five years, half of which are in China's lower-tier cities.

Sportwear is a very big (low-fat) pie

In a May report, Euromonitor calculated the value of the Chinese sportswear market at $22 billion, and forecast it to grow to $28.4 billion by 2018.

Adidas' strategic business plan identifies China as a key focus - it's currently the company's second-largest market after the U.S. in terms of sales.

Standing in the way of attempts to sell even more, though, is fierce rival Nike. In 2014 Adidas had a 13.8 percent market share, based on total retail sales, while Nike had 14.3 percent, according to the Euromonitor report.

Zhang Peng | LightRocket | Getty Images

That said, Adidas reported a 10 percent on-year increase in sales to just under $2 billion in 2014. Currie said sales rose across all categories, especially in running products because running has a low entry cost.

To maintain a competitive edge, Adidas runs consumer research every year and monitors daily sales of each product type across its 8,000 Chinese stores to create a "top ten bestsellers as well as a flop ten" so it can adjust inventory accordingly, Currie explains.

The Beijing Olympics blunder

It was inventory that gave Adidas its biggest Chinese headache. Like most sportswear brands, the company was overly optimistic about how much the 2008 Beijing Olympics would boost consumer demand for sportswear.

Adidas, which had splurged more than $80 million on Olympics sponsorships, ended up with excess inventory.

"The 2008 Olympics was the height of sporting events, all brands had a lot of euphoria and optimism, so inventory was building up and all brands went through some turbulence," Currie tells CNBC.

But Currie says Adidas quickly regained its balance and even gained some market share. "A lot of local brands were trying to get rid of the inventory problem from 2008, and all brands actually went through negative growth," says Currie.

Soccer a key to success?

Adidas may have lost its long-time sponsorship deal with China's national football team to Nike in late 2014, according to Euromonitor's report. But the company is collaborating with the Ministry of Education to promote the long-term development of soccer by sponsoring training programs for young players and coaches.

The sportswear company also developed a free mobile app to teach people how to play soccer and track the user's training development.

It may help that China's president Xi Jinping is reportedly an avid soccer fan. And China is making a push to become a soccer superpower, according to Reuters.

Last week several Chinese investors took a $400 million stake in English Premier League champions Manchester City, setting the record for China's largest foreign investment in a sports team.

Against this background, Currie believes China could to eventually become Adidas' top sales market.

"We're the fastest growing market out of the Adidas group in 2015, and we know that China will be the number one economy by 2020," he says.