The leadership changes, combined with a strategic alignment of NIKE’s operating model against the CDA, will create even greater focus and agility that will be enabled by a nimbler, flatter organization in service of consumers.
Source: Nike Senior Leadership Changes Consumer Direct Acceleration
I’m writing this post for two reasons:
- Matt Kish of the Portland Business Journal just delivered this quote:
Shortly after reporting a rare quarterly loss, Nike on Wednesday announced sweeping management changes and $200 million to $250 million in employee termination costs. No details yet on how many job losses expected. The company continues accelerating its focus on direct sales.
— Matthew Kish (@matthewkish) July 22, 2020
Nike has issued a statement (source link) on their new strategy, CDA (Consumer Direct Acceleration). Matt’s Tweet is telling and sheds light on an issue that has been about 8 years in the making. I’ve written on a number of occasions that as Nike added to their brick and mortar doors and as they’ve built out an intricate and impressive digital network, the brand would no longer have such a strong reliance on wholesale partners. I’ve said this would be a dangerous thing for an already struggling retail industry. COVID-19 has allowed for the acceleration of the reacquisition of their consumers without disrupting the share price growth on Wall Street.
On recent retail visits I’ve witnessed stores that are still carrying inventory from before the quarantine began in March. Wall displays are empty and shipments showing up on manifests aren’t making it on time. Nike however is continuing to drop sneakers online and selling out immediately as retailers are being subjected to a customer who is shopping much more than I expected they would be due to stimulus checks and unemployment. That customer is becoming increasingly irritated with their store visits creating a very difficult situation for store managers. I discussed this here:
I Fear for the Physical and Mental Well Being of My Peers in Sneaker Retail
2. I’m writing about the CDA today because Nike’s recent Move to Zero concept introduction becomes a more compelling discussion. “Move to Zero, NIKE, Inc.’s journey toward zero carbon and zero waste,” is a more diverse combination of footwear releases focused on environmental friendliness. Nike and sustainability, however, is a conundrum. The brand produces so many shoes that will end up in landfills that since the rollout of Flyleather in 2017, a more sustainable material, they’ve relegated the discussion on the circular economy and sustainability to hype. The shoes released, using “greener” methods, have been extremely limited. The drops below in the picture will follow suit and garner ridiculous resale prices.
The CDA will contribute to layoffs inside of Nike as the company streamlines. Any business student can explain why. What many people will overlook is that as Nike becomes more direct-to-consumer they could also cut back on the overproduction of footwear.
It’s basic math. If I cut wholesale accounts and increase sales through my own channels I recoup my expenses faster and I have larger profit margins. Here is the catch and the dangerous part of the discussion that I’m trying to initiate, Nike has cut accounts from 30,000 to 40 partners. In order for Nike to hit the 50 Billion dollar number they are aiming for, they have to:
- open more doors
- add more accounts
- remove bigger accounts
- all of the above
Nike has delivered two new strategies and they are both going to allow the brand to celebrate diminishing their carbon footprint, but what is about to happen here? Will we see the collapse of another major sneaker retail chain? Should we feel bad about this when you consider that a leaner, more efficient Nike means less waste? Nike created the Advanced Product Creation Center and they rolled out a “Revolutionary Method of Make” which includes some digital printing. 3D and customization of Flyknit takes 10 days to order. Nike is accelerating and retail better be paying attention.
I know I am.