Nike has announced that they’ll be using a new business structure, which will involve laying off around 2% of their global workforce.
The retailer released a statement which explained their plans of how they’re also revamping their reporting divisions:
“Nike’s leadership and organizational changes will streamline and speed up strategic execution. The changes are expected to result in an overall reduction of approximately 2 percent of the company’s global workforce.”
Along with these planned changes, approximately 1,400 of Nike’s employees are doomed to lose employment. As of May 2016, there are around 70,700 employees working for the brand. It’s not clarified where the brand will begin to cut jobs and how many workers in the United States will lose theirs. Nike informed CNNMoney that these changes will happen over the course of the next two months.
After their announcement, Nike’s stock began to fall more than 2%.
Aside from laying off their workers, Nike has strategized what they call as “Consumer Direct Offense” that’s planned to be a faster method of providing items to consumers with options for customization.
“Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever,” Nike CEO Mark Parker said in a statement, explaining why they were planning on introducing a new business structure.
These cutbacks are happening after Nike experienced dissappointing sales during their recently reported quarter, a sure sign that their competitors are climbing up the stock market. Nike has solid competition in the form of Adidas, which is regaining more attention thanks to their recent releases, and Under Armour, which recently expanded their athletic gear categories. With these market trends, Nike fell by 1% — the very first one since the year 2009.
Even non-fans of the brand are well aware that Nike is one of the top contenders when it comes to the footwear and athleisure market, especially with customization, and the company’s announcement clearly shows that they’re exerting more effort to focus on that niche.
Additionally, the company plans on cutting 2% of their styles in order to reduce creation cycles by up to 50%. Michael Spillane was put in charge of being President of Categories and Products in order to streamline the process of reducing styles. They’re also planning on building up their direct-to-consumer efforts with the leadership of Heidi O’Neill, President of the Nike Direct Organization, and Adam Sussman, Chief Digital Officer.
In the following months, Nike will be pushing hard for mass customization, new products, and more innovative digital experiences to attract more customers. The company will be kickstarting these efforts this summer, when they’ll be launching their Express Lane in China which will produce items quickly in order to respond to the demands of consumers.
The brand also revealed their plans of merging Nike.com, their direct-to-consumer retail channel, and their Nike+ digital products. The company will cut around 25% of their currently available shoe styles, opting to focus more on their core offerings such as Nike React, Air VaporMax, and ZoomX.
With these new plans, Nike will be focusing on consumers living in 12 major cities, across 10 countries, as these areas are those that are projected to provide 80% of the companies growth by 2020. In fact, the company has already begun accomplishing their goals since the latter part 2015, with their partnership with NOVA and their plans of automation in their factories in order to churn out products quicker. Hence, this mass layoff from the company was something that has been in motion, albeit silently, for a couple years.
The brand also stated that they’re trying to have a simpler geographical structure which will change from six to four segments: North America; Europe, Middle East and Africa; Greater China; and Asia Pacific and Latin America.