Nike Is Cutting 2% of its Workforce
World-famous sportswear brand Nike Inc has announced that it will be cutting two percent of its worldwide workforce as the company undertakes a new restructuring effort.
As of the end of 2016, Nike employed a workforce of 70,000 around the globe. A two percent cut indicates that roughly 1,400 employees will be laid off.
Nike is calling its new initiative “Consumer Direct Offense,” under which the company will be putting out fewer—but more bold—products in order to reach its customers in a more timely and aggressive way.
To achieve that, the company has announced that it will be discontinuing less-popular product styles. In addition, it will be focusing on reaching out to its customers directly through its Web site and Nike-branded stores, while reducing its reliance on third-party sports retailers like Foot Locker, Inc.
Nike Focusing on Profitable Revenue Centers
Nike has also indicated that about 80% of its growth in the coming years is expected to be in 12 key cities around the world. This is why the company will be shifting its focus towards these revenue centers and will be streamlining its business elsewhere.
The cities identified by Nike are New York, Los Angeles, Mexico City, Beijing, Shanghai, Tokyo, Seoul, Berlin, Paris, London, Barcelona, and Milan. This indicates that the American, Chinese, and European markets will make up most of the company’s sales revenue. As party of this targeted strategy, Nike will be scaling back its operations from six geographic regions to four.
Nike’s management has undertaken its new restructuring strategy in order to maintain its lead in the sports footwear and apparel industry.
Nike faces its biggest competition from rival Adidas AG, which has been swiftly gaining ground and clawing away at Nike’s market share in the last two years. Prior to Nike doing so, Adidas launched a similar initiative two years ago to focus on key cities that were generating most of its revenue.
Headquartered in Oregon, Nike is the largest company in the region, where it employs roughly 12,000 employees. The last time the company made significant layoffs was in 2009, during the Great Recession, when about five percent of its workforce was sent home. That move eliminated 1,750 Nike jobs.
Nike’s change in business strategy follows a slowdown in the American consumer retail industry, as retailers across the board face declining sales. The retail landscape is evolving digitally as online shopping becomes increasingly popular.
“Nike will eliminate 1,400 jobs, restructure,” Oregon Live, June 15, 2017.