Nike to cut 2% of workforce as it reshapes consumer approach
Nike has unveiled what it describes as “a new company alignment” that will allow it to better market directly to consumers in a dozen major international cities. In a related move, the company expects to cut around 1,400 jobs from its global workforce, according to a company statement.
The new effort, dubbed Consumer Direct Offense, will allow the sports apparel and shoe brand to serve consumers through one-to-one connections in a list of cities that includes New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan.
The strategy is being driven by Trevor Edwards, president of the Nike brand, who also is consolidating the company’s previous market geography structure from six regions to four, including North America; Europe, Middle East and Africa (EMEA); Greater China; and Asia Pacific and Latin America (APLA). New vice president/general managers have been appointed to lead each of the four regions.
The cities identified for special treatment are expected to account for about 80% of Nike’s projected growth through 2020, the company said. It makes sense, then, for the sports apparel seller to focus more of the company’s energies around those markets. The broader regional market revamp bears close similarity to a previous move by Nike competitor Adidas to organize marketing efforts around four global regions.
At a higher level, Nike is trying to adapt to a changing market landscape and the shifting roles of major global brands and the retailers that sell their products. The initiative arrives as Nike, Adidas, Under Armour and other apparel brands have been increasing their efforts to sell direct to consumers and build one-to-one relationships with them, especially through their mobile apps.
The brands are responding in part to a growing trend among consumers who increasingly want to buy directly from the brands they follow closely, rather than a random retailer, Forrester Research has pointed out. However, as the retail sector has stumbled badly, big brands also may be seeing fit to take matters into their own hands and do what they can to forge loyalty with individual consumers.
That doesn’t mean retailers will be entirely left out of the equation. As Under Armour executive George Hanson stated in a keynote speech at IRCE last week, that company is trying to use direct consumer relationship to lead to better product innovations and more effective retail partnerships.
As part of its new initiatives, Nike is looking to strengthen its innovation efforts and production times. In terms of speed, Nike is working on reducing product creation cycle times by half. Its new Express Lane operation, which is already up and running in North America and Western Europe, quickly creates, updates and fulfills products in response to consumer demand. Nike is bringing the concept to China this summer, where it will serve the key cities of Shanghai, Seoul and Tokyo.
Nike has also created a president of categories and product position to oversee an integrated end-to-end design-to-delivery organization focusing on categories, design, product and merchandising with an emphasis categories expected to grow the most, including running and basketball. A new dedicated Women’s team will complement each top-tier category. The sports and shoe retailer is also creating a Nike Direct organization to organize its digital, direct-to-consumer and member operations.
Nike is trying to transform itself by necessity into a leaner, more nimble company. The job cuts would appear to follow from these efforts, though they may also appease investors who have grown concerned about Nike's market position and financial performance. The reorganization ultimately is Nike’s effort to move past these doldrums. The company and its observers both will be looking for quick proof of the change.