Nike has long stood as one of the world’s leading athletic brands, being endorsed and worn by famous athletes across decades. But in recent years, it’s no secret that Nike’s revenue has been dropping. As the company loses revenue, it will look for solutions to improve profitability, even if it could be considered harsh to some.
As Nike looks to innovation in the modern era, restructuring efforts within the company will effect employees and could even spill into consumers’ experience with the company. The media are focusing on “business shifts” while there are more important nuances that are worth understanding.
Layoffs
Part of Nike’s restructuring efforts have been confirmed to include layoffs within the company that are part of shifting priorities and sourcing outside help. About 2% of Nike’s workforce around the world is being laid off, which equates to around 1,600 employees who will soon be out of a job. The layoffs will come in phases.
A high concentration of these retrenchments will be in Oregon, at their headquarters, with more than 700 employees being planned to be laid off there in June. In a rapidly changing market, Nike needs to either sink or swim.
Sink Or Swim
Nike, like any other business, is shaking up its business model and making unfortunate cuts because it needs to stay agile in a rapidly changing market. Sales are dropping even despite numerous sales, which has led the company to halt all deep discounts.
Customer purchases have reduced overall, but revenue has increased due to the higher prices of Nike products. This is one of many new methods that the business is trying to emerge from economic uncertain as the same giant they have been for decades. Even the CEO has has remarked that the company is “not performing to our potential.”
Nike’s Technology Division
Nike is looking at various departments and has decided to outsource technology positions. This, unfortunately, means that they are cutting a lot of staff in these departments. This desperate bid to improve profit margins should make operations more streamlined and let the company shift its priority to its core athletic products. This move is not without its risks, however.
Tech has been an essential part of Nike’s supply chains, its online sales, and engaging consumers. While outsourcing these positions may save Nike money in the short term, it could have long-term implications as it could lag behind other tech-driven companies.
Will It Save Money?
Nike is following the efforts of many other companies historically by reducing headcount, cutting costs, and then hoping that its enough to increase profit margins for long-term growth. However, this pivot could backfire and Nike could end up being left behind in the tech innovation space.
Nike would become less agile in a competitive market and could even be more prone to security risks with less tech personnel. Nike will focus their efforts on what they’ve built their brands on – merchandising and design.
The Impact On Customers
Well, many might believe that laying off part of their tech department may not affect the customer experience, but there could be consequences for consumers who like to do their shopping online. With fewer resources allocated to technological aspects of the company, digital storefronts could be maintained less, leading to slower loading of pages and maybe even glitches.
The seamless checkout experience online may also be affected. With prioritization on the product itself rather than innovating its online presence, many other companies could see this as an opportunity to innovate their own online spaces way ahead of Nike’s.
Customer Spending Is Going Down
The consumer market for Nike products is slowly shrinking as shoppers are changing their spending habits. Many people are more frugal than they ever have been before as economic downturns make them rethink where their money goes and often leads to spending more on essentials and less on luxuries.
Nike strives to be a brand about quality, which means their products can be undercut easily by cheaper options. Surveys have shown that nearly 60% of U.S. customers are looking for cheaper, more affordable brands, and nearly 70% are spending significantly less on retail items.
A Competitive Market
Retail is already a highly competitive market, and Nike fills a niche that becomes less affordable as people are hit with economic uncertainty. The leading athletic brand has seen a 20% decline in market share since 2022, mostly due to other competitors having more of a presence in the same market.
Rival brands like On, Hoka, and Lululemon are all innovating their products and are targeting younger consumers, overtaking market share. Nike’s shift to save more money could end up driving away customers who prefer digital spaces and product drops, both of which should see a reduction from Nike.
What’s Next For Nike?
Nike is trying every trick up its sleeve to try and stay relevant and increase market share and profitability. The brand is going back to wholesale partnerships that it once shied away from and focus on revitalizing the brand through such as launching a new cycle for its Air products.
It is apparent that Nike is trying to make a simpler business model by hiring more people in design and merchandising, which harkens back to their glory days and initial success. It is a risk, but in a market that changes on a dime, Nike has to try to adapt.
A Future On The Line
Nike’s recent layoffs and restructuring showcase that the brand is struggling in the modern era. With reductions in tech and a focus on familiar roads, the brand could set itself up for a prospective future.
However, for consumers, this will mean less innovation in the digital space. Nike’s next move is an important one, as it will either stay a top dog or sink further into market decline.
Discover more DIY hacks and style inspo- Follow us to keep the glow-up coming to your feed!
Love content like this? Tap Follow at the top of the page to stay in the loop with the latest beauty trends, DIY tips, and style inspo. Don’t forget to share your thoughts in the comments — we love hearing from you!