Nike layoffs are the result of a brand strategy gone awry, experts say

The impending layoff wave, first reported by Reuters and Oregon Public Broadcasting on Friday, is part of Nike’s broader strategy to downsize its workforce by 2%, a goal announced in February. The decision is also attributed to factors including a sluggish market environment and intensifying domestic and international competition.

But the layoffs may also hint at broader strategic problems plaguing the brand.

Recent decisions at Nike reflect a departure from chief executive John Donahue’s pandemic-era strategy, which focused on reissuing older products and leaning into e-commerce.

The company began dialing back retail partnerships – including those with youth-beloved Urban Outfitters, Olympia Sports and footwear giant DSW – in an effort to capitalize on what it viewed as an opportunity to expand direct-to-consumer operations.

Instead, stock piled up and challengers like Hoka began adopting strategies reminiscent of Nike’s early success.

The changes also undermined Nike’s culture and reputation of innovation and, in some respects, its strong brand identity. As a result, the company’s first-quarter sales remained flat, and its shares slumped 24% over the past year.

It’s no wonder, some experts say, that once-loyal Nike fans are looking elsewhere.

“They’re looking for options that are tailored closely to their comfort and performance goals, and that supersedes any loyalty they might have had to an incumbent like Nike in the past,” says Brandon Carter, director of strategy at communication design agency Codeword. “They’re willing to experiment with other brands to find the right fit.”

Arun Kumar, former chief data and marketing technology officer at Interpublic Group agrees. “Every brand has a territory it owns and can potentially own. When it strays too far from how people perceive your brand, you lose,” he says. “Nike was known for making innovative sneakers for athletes that the rest of us could wear. It moved away from that goal, lost the plot on innovation, and started relying on data and analytics to compensate.”

Nike’s layoffs aren’t a bellwether for the retail industry as a whole, but rather a direct result of its radical shift in strategy, in Kumar’s telling.

What’s more, Nike’s heavy reliance on data and AI has not helped it better understand its consumers, Kumar says. And this should serve as a cautionary tale for other brands. “If AI or analytics is not being deployed in service of the brand and to enhance the brand in the territory it owns … the invariable result is defeat in the marketplace,“ Kumar says.

However, while layoffs are sure to generate uncertainty for both Nike employees and investors, Stefanie Magness, a publicist and agent at Elevate U PR, suggests that the ends may justify the means for the brand – and ultimately improve business outcomes. “Nike’s layoffs are like a wardrobe refresh,” she says. “Sometimes, you must clean the closet to make room for new styles. In this case, Nike is streamlining its operations to stay nimble and competitive in a challenging market.”

At the same time, Magness emphasizes the critical need for transparent and strategic communication from Nike during this period in order to allay consumer worries and maintain brand credibility.

“People are increasingly interested in the values behind the brands they support,” she says. “How Nike communicates through this transition will be critical in shaping how consumers perceive the brand In my experience, transparent and strategic communication during times of change can turn challenges into opportunities.”

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