Nike’s Pulling Out Seen as Blow to Amazon
Another sign that Nike is accelerating growth on its own digital platforms.
Nike has a new game plan — and it doesn’t include Amazon.
The athletic apparel and shoe maker did an about-face in its relationship with the e-commerce giant on Wednesday when it said it would no longer sell products directly to Amazon.
“As part of Nike’s focus on elevating consumer experiences through more direct, personal relationships, we have made the decision to complete our current pilot with Amazon retail,” Nike said. “We will continue to invest in strong, distinctive partnerships for Nike with other retailers and platforms to seamlessly serve our consumers globally. We will continue to partner with Amazon’s Web Services to power a suite of services on nike.com and within Nike’s ecosystem of apps.”
While many fashion and retail companies had resisted selling on Amazon in recent years — the fear being that they would lose control over their brand — Nike embraced the online shopping platform. The pilot program between the two, which began in the summer of 2017, allowed Nike to sell a limited assortment of shoes, accessories and apparel on Amazon in exchange for a stricter monitoring environment in regards to counterfeit goods and unauthorized third-party sellers.
As early as December 2017, Nike’s chief executive officer Mark Parker said the program was “going well.”
“We’ve seen good sell-through on the limited selection of products that we have offered,” Parker said on the conference call with analysts that month. “When this operates at the highest level there’s a great opportunity between Nike and Amazon to serve the consumer in ways that are mutually beneficial to Amazon and Nike. We’re bullish on where this can go from here. The important part is that we advanced the brand through better presentation and then the sharing of data so we can better serve consumers. I think that’s really what we’re driving for behind the Amazon relationship and frankly, any digital platform relationship we have.”
Counterfeits and unauthorized sellers aside, Nike also had the potential to benefit from Amazon’s seemingly endless wealth of customer data.
“But it seems like it hasn’t worked,” David Swartz, an equity analyst at Morningstar, told WWD. “Most likely they were disappointed by the large amount of third-party Nike stuff that is still being sold on Amazon, as well as the constant headache of counterfeit stuff.
“To expect Amazon to get rid of the third-party sellers is not that realistic,” he continued. “The thing is, Amazon doesn’t want to get rid of the third-party sellers because they make huge amounts of money off the third-party sellers.”
Last month’s sudden announcement that Parker would be stepping down from his role as ceo in January to make way for John Donahoe 2nd, a Nike board member, might be another reason for the sudden shift in strategy. Donahoe has extensive experience in e-commerce, including leading eBay Inc. from 2008 to 2015.
“Nike’s overall strategy is to make their own e-commerce platform bigger,” Swartz said. “They’re still putting their efforts into sneakers and their own apps and their own web site. That’s going to take precedence over their Amazon sales.”
He added that Nike would likely not have ended the pilot if it was profiting from the deal.
“It’s probably more of a negative for Amazon than it is for Nike,” Swartz said. “I’m sure Amazon would like to have some major brands like Nike selling through its site.”
Amazon did not respond to requests for comment.
But Randy Konik, an equity analyst with Jefferies, pointed out in a note that it’s brands — not e-commerce platforms — that build community.
“Amazon is just a traffic aggregator that reduces friction in consumption, it doesn’t build communities,” Konik wrote. “The move shows us that strong brands realize that traffic driven to their own site is self-sustaining, more profitable and actually brand-enhancing, while traffic and incremental revenue from Amazon.com is less profitable but also less brand enhancing. We believe many strong apparel (and even non-apparel) brands will continue to avoid or curb their relationships with Amazon in the future.”
Regardless, consumers will still be able to shop for major brands, like Nike, on Amazon.
“The amount of Nike stuff available on the Internet is massive,” Swartz said. “Nike understands that they can’t do much about that. That’s just the way it is. They can’t stop people selling Nike shoes on eBay either. Sure, they would rather have everyone buy directly from them at Nike.com, but that’s not realistic.”
Shares of Nike closed up 2 percent Wednesday.