Nike announced their third quarter results in March earlier this year. On the surface it looked pretty stellar – revenues for the quarter were +5% to US$8.4B and for the 9 month year so far +6% to US$25.67B.
When you drill down in to the current global businesses regional presence, every area was still in growth including their home market, North America, which grew at +3%. That’s about where the fun ends…hidden towards the back of their financial results (in fact the second last page) is an important metric for their future performance – ‘Future Growth by Geography’. This is the section where Nike report their future orders scheduled for delivery from March 2017 – July 2017. In this area they are predicting a total decline for the brand (incl. Converse) to -4% with -9% in future orders in their home market, North America.
- Intent: Moving the intention of the business from globalising (growth through market expansion) to ‘local business, on a global scale’ (growth through focusing on key markets). This is the starting point for the intention behind all tactics and strategies that follow.
- Focus: Instead of spreading resources around the world, they’re focusing more on key markets. In their case that’s 12 cities that make up a majority of their sales and sales growth. In these areas their mandate is to release new products faster. Cities like New York, Paris, Beijing and Milan, are expected to make up 80% of the businesses growth in the next 2.5 years. So it makes sense that they’re ruthlessly prioritising these markets.
- Go Deep: Nike, like most other businesses, has felt the pains of online and how that is changing the role of the physical store. In reaction, they are not closing stores but rethinking stores as places to foster and deepen relationships with customers; then link the stores through to their digital efforts. This naturally means their focus will not be on breadth of distribution channels (aka department stores) but their own stores as a means to close this loop.
- Speed Up: It seems that Nike is taking cues from Zara’s model and also looking to speed- up the pace at which they go from design to delivery of new product. It has openly stated it wants to cut it’s product creation cycle time in half.
- Streamline: Matching their strategic change with organisation change, Nike are cutting their workforce by 2% -that means approximately 1,400 people will be laid off.
Sign-up to our news