Facing pressure from investors and competitors, Nike said it is shaking up its organization to focus more on consumers in just a dozen cities around the world and on releasing new products faster in those places.
Nike shaped itself into one of the globe’s most recognizable brands. Now it has a new idea: Go local.
Facing pressure from investors and competitors like Adidas, Nike said Thursday that it was shaking up its organization to focus more on consumers in just a dozen cities around the world and on releasing new products faster in those places.
The company said it would cut about 2 percent of its global workforce as part of the changes. Based on employment figures from Nike’s latest annual report, the layoffs will affect about 1,400 people.
Like many other brands, Nike is trying to keep up with rapidly evolving consumer preferences, both in terms of how consumers buy signature shoes and athletic gear and what it offers shoppers. Orders in the company’s biggest market, North America, were down 9 percent in Nike’s third quarter, according to a research note from Goldman Sachs.
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“The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” Mark Parker, Nike’s chief executive, said in a statement Thursday. The company is “getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”
To keep its products relevant and make its service more personal, Nike aims to develop what it called a “local business, on a global scale” and “deeply” serve customers in 12 cities in 10 countries: New York, Los Angeles, London, Shanghai, Beijing, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan. Those places are expected to deliver 80 percent of the company’s growth over the next 2½ years.
The new strategy might result in localized products and styles, tailored to consumer tastes in its target cities.
Despite the move to online shopping that is transforming retailing, Nike is not giving up on its physical stores. Instead, the company will use the stores to try to foster relationships with customers and further link the shops to its digital efforts.
Nike, which is known for sponsoring star athletes like LeBron James and Rafael Nadal, will also try to speed up how quickly it designs and works with its suppliers to deliver new gear. The company wants to cut its product-creation cycle time in half.
That idea is not a new one. Retailers such as Zara have found success by continually delivering fresh products to its physical and online stores.
Nike executives would not comment beyond the company statement.
But in March, Parker told analysts that consumers wanted the product fast, in an easy way and with personal service. “These are all things that are driving some of these shifts in the marketplace,” he said.
Investors appeared skeptical about Thursday’s announcement, sending Nike’s stock down 3.2 percent Thursday. Shares in Nike have bounced around over the past year, and are essentially flat over that time period. The company reported a $3.2 billion profit for the nine months that ended in February, up 10.9 percent from the same period the previous year.
Erin Lash, an analyst at Morningstar, said building up direct-to-consumer sales, instead of relying on outside retailers like department stores or clothing chains, could prove expensive for Nike.
The strategy requires “greater investment and higher overhead,” Lash said. “Profits also tend to be more cyclical with the economy.”