Nike lays off tech leaders as company cuts costs

To receive the Vogue Business newsletter, sign up here. Nike’s anticipated layoffs of an estimated 1,600 people, or 2 per cent of its workforce, have begun this week, with multiple senior leaders across technology and marketing part of the cuts. These include VPs in technology, innovation and marketing, and senior directors in Nike’s technology innovation office. The layoffs come on the heels of a dip in share prices for Nike stock — down 13 per cent year-on-year — and slowed revenue growth. In December, it announced a sales increase of 1 per cent, which missed expectations for the second quarter in a row. Nike also decreased its sales outlook for the year, and announced plans to cut $2 billion in costs over a three-year period. External factors such as decreased consumer spending and increased competition from smaller trainer brands are driving many of Nike’s recent struggles, which analysts also attribute to a series of missteps that have led the brand off course. Layoffs are a faster way to recoup revenue than increasing sales. The significant layoffs in tech and marketing also come after bringing on new CTO Muge Erdirik Dogan (who most recently led Amazon Fashion) and CMO Nicole Hubbard Graham late last year. This week’s round of layoffs will be followed by a second round slated to complete by the end of the fourth quarter, which for Nike is in May. (Distribution centres, Nike Air manufacturers and store employees are not included in the layoffs, according to the company.) Nike, a long-time leader in sportswear, has also led the charge in digital innovation. In recent years, it has cut wholesale distribution in favour of its own channels, developed a suite of apps, such as the Snkrs app for coveted product drops, invested in high-tech stores and been proactive in Web3, including an early acquisition of Web3 brand Rtfkt and a later development of its own Web3 studio, Nike Virtual Studios (NVS). In an internal memo that was shared with Vogue Business, CEO John Donahoe said that Nike often wins when it offers innovative products, distinctive storytelling and differentiated marketplace experiences, suggesting that these are areas that need renewed focus. “Speed and end-to-end execution is critical to win. To compete, we must edit, shift and divest less critical work to create greater focus and capacity for what matters most.” In a statement emailed to Vogue Business regarding the layoffs, a Nike representative said: “Nike’s always at our best when we’re on the offence. The actions that we’re taking put us in the position to rightsize our organisation to get after our biggest growth opportunities as interest in sport, health and wellness have never been stronger. While these changes will impact approximately 2 per cent of our total workforce, we are grateful for the contributions made by all Nike teammates.” (The company declined to comment on specific personnel changes.) As part of ongoing turbulence for the company as well as the wider industry, which saw Nike pivot back to wholesale partnerships, the brand has also lost a number of athlete relationships — including multiple British football players, Tiger Woods, Simone Biles and Roger Federer — in recent years. Analysts expect an ongoing recalibration across where Nike invests in innovation; in its September earnings call, executives acknowledged that innovation in its running products had lagged behind. “The innovation needs to sit in product. That’s where the money needs to be pumped in,” says Jessica Ramirez, senior research analyst at Jane Hali & Associates. “The customer always wants to see newness, and that is where Nike has become stale.” While the tech and innovation team cuts are across the broader organisation, and not limited to NVS, this new strategy raises questions around how digital innovation will be a priority. NVS was founded in January 2022 to oversee the brand’s Web3 and metaverse experiments. It developed “Dotswoosh” (.Swoosh) in November 2022 as a way of creating wealth for participants — and generate ongoing secondary revenue for Nike — by co-creating phygital products using Nike’s library of intellectual property. This was a key success strategy for Web3 trainer startup Rtfkt, which Nike acquired in December 2021. Since then, NFT hype has waned, cryptocurrency values have decreased and secondhand revenues are no longer a money-making strategy. Towards the end of the NFT sneakerhead craze, Nike sold an estimated $3 million worth of its first Web3 trainers, but given the huge cost of building and developing the NVS business unit, that is not much payout. (For context, Nike’s total 2023 revenue was more than $50 billion.) Nike has since moved away from NFT collectibles to gaming skins and other in-game assets (some as digital twins, some as digital-only), but this strategy is still nascent. (Because of existing signed contracts, it can take a while for any major strategy changes to develop.) It signed deals with gaming company Electronic Arts and Fortnite-owner Epic Games; after creating a virtual world in Roblox that received mixed reviews, it created an Airphoria experience in Fortnite that directed players to Nike-owned channels. It’s challenging for any brand at this stage to be considered a winner in Web3. Even though Nike is considered a leader, most players in the Web3 trainer game have pulled back: Adidas, Puma and even Rtfkt have all slowed on drops and announcements. “They thought Web3 would be a revenue-driving machine, but that was a bubble and once that popped, there is no revenue,” says Matt Maher, founder of research and development firm M7 Innovations. And while the Dotswoosh strategy is smart, Maher says, the initial rollout has been plagued with multiple “weird mishaps”, in his experience, including launching without a Web3-friendly communications channel (such as a Discord server) to answer customer questions, technical hiccups (Maher tried to buy one of the Dotswoosh sneakers but was unable) and complex acquisition mechanics. That’s not to say that the race is over. The Nike Web3 innovation strategy is still “directionally correct”, Maher says. Rtfkt still enables Nike to test and learn in a safe way, and the Dotswoosh strategy keeps fans within the Nike ecosystem while standing to provide access to valuable zero-party data. For now, industry experts expect more of a focus on immediate revenue gains over long-shot bets — both at Nike and across the tech and fashion industries; Amazon, Maher points out, shuttered its Amazon Go stores as part of cost-cutting measures, and Meta has also recently conducted layoffs in an attempt to cut costs. A similar story is playing out at Nike. “Dotswoosh might help in five or 10 years, but [right] now the focus is on what drives revenue.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More on this topic: Nike misses expectations as North American sales lag Nike crashes Paris Couture Week to unveil new era for womenswear Nike takes gaming to next level with metaverse space in Fortnite

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