Nike’s New Strategy Cuts Workforce, Reduces Shoe Styles

Nike is testing its own agility. The No.1 athletic footwear brand announced Thursday a new restructuring model that cuts about 1,500 jobs and reduces the number of styles offered by 25 percent. The move is Nike’s effort to reconnect with consumers and combat softening sales.

Wall Street didn’t react well to the plan. Nike shares fell 2 percent on Friday after it was downgraded at J.P. Morgan, which named concerns over decelerating North America sales. In March, Nike reported a tepid outlook for 2017 due to the economics of traditional retail and a promotional retail environment.

Under the new alignment, called “Consumer Direct Offense,” Nike aims to better serve the consumer personally, at scale. “The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” said Mark Parker, Nike, Inc. chairman, president and CEO. “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”

Led by Nike Brand President Trevor Edwards, the Consumer Direct Offense is based on Nike’s “Triple Double strategy: 2X Innovation, 2X Speed and 2X Direct connections with consumers.”

“Today we serve our athletes in a changing world: one that’s faster and more personal,” said Edwards. “This new structure aligns all of our teams toward our ultimate goal—to deliver innovation, at speed, through more direct connections.”

Nike will focus on 12 key cities (New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan), which represent over 80 percent of Nike’s projected growth through 2020.

To improve efficiency, a simplified geographical structure supports all key cities and countries, changing from six to four—comprised of North America; Europe, Middle East and Africa (EMEA), Greater China, and Asia Pacific and Latin America (APLA).

A new organization, Nike Direct, led by President of Nike Direct Heidi O’Neill and Adam Sussman, chief digital officer, will unite Nike.com, direct-to-consumer retail, and Nike+ digital products. Nike will also extend innovations to its strategic wholesale partners.

Nike Direct aims to unite physical and digital retail to serve consumers through apps like SNKRS Stash, which unlocks access to exclusive Nike and Jordan product using mobile geo-locations, and Shock Drop, alerts that allow consumers to buy instantly through the app or at their nearest Nike or wholesale store.

Over the next several months, Nike is also launching its Nike+ and SNKRS apps globally to energize the sneaker experience in new markets.

To give customers more of what they love, Nike will edit its offerings by 25 percent and focus on building deeper selections of key franchises. The brand will also slash product creation cycle times in half by rolling out a new “Express Lane” in China. Already operating in North America and Western Europe, Express Lane quickly creates, updates and fulfills products in response to consumer demand.

The company tapped Michael Spillane, Nike Inc. president of product and merchandising, to help ramp up speed. Spillane is assuming the new role of President of Categories and Product, leading an end-to-end design-to-delivery organization, including categories, design, product and merchandising.

The new organization will place resources in the categories with the highest potential to fuel growth, including running, basketball, sportswear, men’s and women’s training, global footwear and young athletes. To build on the growth of the Nike Women’s business, a new dedicated Women’s team will support each top-tier category.

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