How does Nike seek breakthroughs in the face of numerous challenges?

Recently, Nike, a sports goods giant, announced that it will lay off about 2% of its workforce, aiming to cut costs by up to $2 billion. Nike CEO Tang Ruoxiu stated that the company will increase its investment in categories such as running, women's clothing, and the Jordan brand through this layoff. However, this measure is not expected to affect the employees of Nike stores and distribution centers, nor will it affect the employees of Nike's innovation team.

In the increasingly competitive sports goods market, some emerging brands are gradually eroding market share. Lululemon, which started with women's yoga pants, has recently entered the men's shoe market, while Federer's Swiss brand On Holding Run and its parent company Decker Outdoors, Hoka One One, with more detailed performance divisions, are also competing with Nike. In this situation, even though Nike still leads in terms of size, there is an urgent need for Nike to tell a new story by launching new products.

Layoffs are aimed at reducing costs. It is reported that Nike has approximately 83700 employees worldwide, so the company may lay off more than 1600 positions. The layoff action starts on February 16th and is expected to last for a week. In addition, it is expected that Nike may further lay off employees at the end of this quarter and the following quarter. In the Greater China region, Nike completed a layoff in 2020, with a layoff rate of 20% and approximately 400 employees, while now there are approximately 2000 employees in the Greater China region. According to financial reports, the macroeconomic environment in markets such as Greater China, Europe, the Middle East, and Africa is also facing pressure.

With the gradual easing of the epidemic and the recovery of consumer consumption habits, Nike is facing the problem of excess inventory. The latest financial report shows that Nike is working hard to digest these old products, and inventory has decreased to $8 billion, a year-on-year decrease of 14%. In addition, Nike has refocused its direct to consumer model in recent years. In the second quarter of this fiscal year, Nike's DTC revenue was $5.7 billion, a year-on-year increase of 6%; The sales in the wholesale sector decreased by 2% year-on-year to $7.1 billion.

In the footwear market, Nike and Adidas have long held 80% of the shelf share in retail stores, but now emerging brands such as On Run and Hoka One are gradually changing the market landscape. Nike and Adidas both mentioned in their financial reports that some wholesalers such as Dick's Sporting Goods and Foot Locker have had an impact on sales by reducing orders. Foot Locker revealed at the third quarter financial report meeting that sales of footwear products from brands other than Nike have increased from 32% in the same period last year to 36%, with the goal of increasing this number to over 40%.

In the pursuit of market share, Nike launched women's yoga pants, while Lululemon began selling men's shoes. Tang Ruoxiu said at the performance meeting, "In the past three years, our women's product business has achieved high single digit growth on average. 40% of our members are women, who make up a larger proportion of new members, and the demand for each member is growing faster. We have launched different price range bra and leggings series, personalized leggings Zen."

Overall, in the fiercely competitive footwear and clothing market, both traditional and emerging brands need to constantly transform or upgrade to meet the needs and preferences of consumers. Nike faces challenges and uncertainties, and how to seek breakthroughs in difficult situations will become a question that its management needs to ponder deeply.