Just Did It: Nike is now exiting Russia completely, 3 months after stopping operations

Three months after temporarily suspending its operations in Russia, Nike has decided to make a complete exit from the country. Nike had temporarily suspended operations in its owned and operated stores on March 3, 2022, to protest against Russia's invasion of Ukraine. 

But Russia's collapsed economy, non-operations of foreign brands and new draft laws to seize assets of global companies suspending operations are just encouraging foreign companies to exit the country permanently. 

'Nike has made the decision to leave the Russian marketplace. Our priority is to ensure we are fully supporting our employees while we responsibly scale down our operations over the coming months,' a statement emailed to Reuters said.

WHY ARE BRANDS RUSHING OUT? 

There were reports of Russia creating a new draft report in March 2022 as a tit-for-tat reaction against the foreign companies that had shut shop or had suspended their operations in Russia. As per the draft laws, the Russian government could basically control and confiscate the assets of the foreign companies if:

1. A company was controlled by foreign countries or a person from an unfriendly state.
2. The book value of the foreign company was more than £7,100,000 or the company had more than 100 employees.
3. If the management or the shareholders left Russia after February 24, 2022, and the operations were terminated without justification, or the value of the business was damaged or made insolvent or the company's economic interest was damaged. 

WHAT ARE THE RIVALS DOING? 

In March 2022, Adidas had shut down stores and paused online sales while Puma had shut down its stores and paused deliveries. Meanwhile, in May 2022, Reebok was in talks with Turkish shoe retailer FLO Magazacilik to sell more than 100 of its Russian stores.    

WILL THIS IMPACT NIKE MUCH?

Not really. As per a 2019 report, Nike's total business from Russia and Ukraine was about 1% while that of Adidas was 3%. So this move seems to be more symbolic than financial. This move is also in line with Nike's inaction in March 2022. Russian media had reported in March 2022 that Nike had not renewed agreements with its largest franchisee in Russia- Inventive Retail Group (IRG) - which operated 37 Nike-branded stores in Russia. 

But in terms of numbers, Nike took a $200m ( about Rs 1,566 crore) hit to its third-quarter revenues after pausing Russia operations. 

Here's a question to ponder: As we see the trend of rich Russians migrating to the Middle East to escape the Russian reality, what will Nike do when they have to service Russians abroad?