Consumers Upset with Nike After it Announces Plans To Lay Off 400 Employees in China
Recently Chinese consumers are questioning why Nike plans to lay off 400 employees in China after the country helped the brand survive the economic impact of COVID-19.
From June through August this year, Nike’s sales in China grew 6% to 1.78 billion RMB and during the first sales period of the 11.11 shopping festival, Nike became the first brand on Tmall to break 100M RMB sales. Despite the strong sales figures, Nike is still going through downsizing in China.
The downsizing is divided into two phases and the first one has begun in Beijing and Guangzhou. Some of the people getting laid off are senior managers, it’s not just about average employees. But in the past July, Nike just opened its third concept store in Guangzhou, following Nike Live in Los Angeles and House of Innovation in Shanghai. As a Chinese consumer, this is really confusing.
One possible reason for layoffs is an increased focus on online sales and downsizing of their offline retail employees. The CEO of Nike, John Donahoe announced in June that digitalization will be the main strategy for Nike to compete during the COVID-19. In fact, Nike’s digital marketing strategy has paid off in China. Either on the past 618 shopping festival or during Double 11, Nike ranked No.1 in the sportswear categories.
Another could be that despite strong sales in China, COVID has hit them too hard internationally and the sales’ growth in China is not able to fix the gap. According to Nike’s fourth season (March 1 – May 31) financial report in 2020, its revenue decreased 38% and its net loss reached $790M. The situation in the same period in 2019 was that Nike’s retained profits reached $989M. 2020 could be the worst year for Nike since 1998.
But then according to John Donahoe, the laying off is not about COVID and staff cost, it’s because Nike is going through a reconfiguration. What do you think?
Lululemon Benefitting From Nike Layoffs
Following Nike, Adidas and Under Armour have announced similar plans for layoffs. In contrast, popular yoga brand Lululemon is scaling up, hiring numerous senior executives who have left the other three brands. Though the brand was facing great challenges from domestic althleisure brand Maia Active and Particle Fever for the reason that these two brands specially designe outfits based on Chinese consumers’ body shapes, Lululemon now has an Asian collection where it raises the waistline and cuts off the length of pants.
Lululemon entered the China market in 2016 when it opened 3 stores in Shanghai and Beijing. Most of its stores’ locations are in prime CBD locations. Despite choosing locations with extremely high rent, the brand has managed to open 26 stores in China. According to Sina News, Lululemon’s third season sales in 2019 grew 76% compared with the same time in 2018. Together with its offline yoga activities, consumers are building close connections with the brand. CEO of the brand Calvin McDonal is also aware that COVID-19 has changed consumer behavior, causing more people to shop online. Instead of laying people off, he has been re-skilling employees and transferring them to positions related to ecommerce and digital marketing.
Chinese consumers are increasingly aware of their importance to brands throughout the world. While brands spend millions on marketing and PR to improve their reputation, situations like these, such as unclear employee layoffs, can quickly destroy that hard earned image and its something that brands will need to take into greater consideration moving forward.
Read more: 深度｜Nike中国将裁员400人，传递了什么信号？
