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Nike NKE is choosing to stop selling directly to e-commerce giant Amazon AMZN in a push to sell more directly to customers. The abrupt halt to the partnership between the two companies will end the pilot test Nike entered with Amazon back in 2017.
Nike agreed to sell a limited product assortment directly to the digital commerce kingpin in exchange for stricter policing of counterfeits and restrictions on unsanctioned sales; this included product like athletic footwear, apparel, and accessories. Nike has been saving its highest-profile products and limited releases for its own SNKRS app or specialty stores that typically avoid heavy discounting.
In a statement Tuesday, Nike said it has decided to focus on its direct business, though it will continue to seek partnerships with other retailers and platforms. Nike officials were disappointed the deal with Amazon didn’t eliminate counterfeits and give the brand more control over gray-market goods that account for many of the Amazon listings. These items are typically purchased from retailers or distributors then resold on the site.
Potential Implications
Now that Nike decided it does not want to sell its merchandise directly to Amazon, it may open the door for other retailers to follow suit. The fear for many brands has always been that, by partnering with Amazon, a company loses control over how its brand is represented on the site.
The owner of Birkenstock pulled its products in 2016, saying Amazon wasn’t doing enough to police the gray market and counterfeit sellers. Other big brands in the apparel space like Adidas ADDYY and Under Armour UAA still sell directly to Amazon. Some think that it is only a matter of time before large brands realize that they don’t need Amazon.
Jefferies analyst Randy Konik said “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.”
Nike is choosing to focus on its direct to customer sales, which is one of the fastest growing parts of its business. In fiscal 2019, Nike Direct revenue jumped 16% on a currency-neutral basis, to $11.8 billion, driven by a 35% surge in e-commerce sales. Nike Direct currently represents about 30% of the company’s revenue, and the number is bound to grow as the firm ramps up its e-commerce presence. While partnering with Amazon can help Nike boost its e-commerce sales, the shoemaker would rather have complete unilateral control of its brand’s portrayal in the digital realm.