What will a Nike/Amazon deal mean for the brand and other retailers?

Discussion
Source: Nike
Jun 23, 2017
George Anderson

Nike is hoping a new direct deal with Amazon.com will help the brand boost sales while curtailing the counterfeiting activity that has affected its top and bottom line performance for years.

According to reports, Nike is close to joining Amazon’s brand registry program, allowing the company to sell directly to the e-tailer while maintaining control of its messaging and gaining access to consumer purchasing data.

As part of the registry, Nike would also identify unauthorized sellers and have them shut down on Amazon’s marketplace. Today, there are almost 2,000 branded products in the registry from companies such as Clorox, Johnson & Johnson, Procter & Gamble, Toms and Victoria’s Secret, according to Bloomberg.

While Nike has sold on Amazon-owned Zappos.com, it has never sold its products directly to the e-tail giant. Moving to Amazon could provide a boost to sales at a time when Nike has been hurt by the Sports Authority bankruptcy and a sales slowdown at other chains. Nike rivals Adidas and Under Armour both sell directly to Amazon.

“You have to be on Amazon,” Herb Sawyer, iCrossing’s vp of strategy, told Digiday. “So you’ve got to figure out a way to parallel-path like Amazon. You have to have a platform where the store is in your pocket, but also speak to people who are thinking beyond the immediate buy and get them beyond a commodity purchase.”

Nike’s wholesale business currently represents about three-quarters of its total revenues, but consumer direct rose 18 percent in the last quarter, more than triple the brand’s growth overall.

The Financial Times reports that selling on Amazon would give Nike a more direct connection with Millennials males. The publication, citing a recent Goldman study, reported Millennial men rate Amazon as their number one site for every category except shoes and athletic merchandise. Adding high profile brands such as Nike is key to Amazon’s strategy of becoming the biggest seller of apparel in the U.S.

Goldman estimates that Nike revenues would rise one percent above current levels by selling on Amazon.

DISCUSSION QUESTIONS: What is your reaction to the speculation that Nike will sell directly to Amazon by joining its brand registry program? What will this mean for the brand, Amazon and other retailers that sell Nike products?

Braintrust
"Like Wall Street and so many others, Nike’s betting on the lead horse."
"I think this is the right move by Nike, but they should control the products on Amazon tightly and try to give shoppers a reason to buy on nike.com."
"Beware that others have either left (or joined) Amazon to find their brands compromised in other ways."

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20 Comments on "What will a Nike/Amazon deal mean for the brand and other retailers?"

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Mark Ryski
BrainTrust

While late to the party, this is the right move for Nike. Brands need to constantly find channels to reach their consumers, and the reach of Amazon is unrivaled. Where acquiescing to the Amazon machinery might have been considered net negative to a brand’s image years ago, that’s no longer the case today. Amazon has become an important channel and I expect to see more brands join the party.

Lee Peterson
BrainTrust

Wow, that hurts, eh? But like Wall Street and so many others, Nike’s betting on the lead horse. After all, it’s their livelihood that’s at stake, so it’s hard to blame them. It is also further proof that being a middle man in the digital age rather than someone with original, branded product is NOT a good position to be in. If the “Everything Store” has your stuff too, it’s time to re-think what you’re doing.

Art Suriano
BrainTrust

I think it’s a good move for Nike and it should boost their sales. I don’t see a downside for Nike or Amazon. For other retailers selling Nike, they will have to be very careful with price matching and if possible other customer incentives. The best solution would be Nike selling about 40 percent of the same products on Amazon as other retailers, and then providing Amazon with 30 percent of products only available on Amazon and the other retailers 30 percent of goods not available on Amazon. I think it’s better for a brand to maintain some control of what it provides its partners to sell allowing all their resellers to present products they have exclusively and giving them all a bit more of a competitive edge.

Brandon Rael
BrainTrust

This was inevitable. As the lines are being blurred between the physical and digital shopping experiences, brands now are following suit and taking advantage of digital channels that go directly to the consumer. To remain relevant, trendy and accessible to the digital native generation, every specialty manufacturer has to consider the significant positive impacts and Amazon’s reach. The concepts of brands has experienced some issues in our digital-first age and, by being part of another channel, Nike has taken a strategic leap of faith as it goes direct-to-consumer, instead of going through the traditional retail channels.

This represents a significant paradigm shift and a warning shot to the specialty athletic brick-and-mortar sector that has been suffering over the past few years. This move by Nike, and potentially others in the specialty space, puts tremendous pressure on the brick-and-mortar stores to continuously innovate and drive a superior customer experience. It’s not an easy task to say the least.

Charles Dimov
BrainTrust

Nike has been a channel-focused brand. However the reality of today is that brands are all working both the direct channel (e-commerce, Amazon and branded brick-and-mortar locations) and the retail channel model. It is the new reality that brands must play on both sides. There is no longer a question about whether Apple stores are a good idea — although when they started there was a furor about whether all their channel partners would abandon their products. Today’s reality is that retail is a mixed and omnichannel play. It means that retailers have to continually prove their high value both to customers and to brands.

Ken Morris
BrainTrust

This move will clearly hurt Nike’s retail partners. A large portion of any sporting goods retailer’s sales are Nike product. It is hard enough to compete when Nike has been limiting retailer product access (new styles, etc.) while competing directly via their website. This move, while addressing the counterfeit problem, creates another competing channel that makes it increasingly difficult for brick-and-mortar retailers to compete. This move while good for Nike is a real problem for their traditional retail partners.

Gene Detroyer
BrainTrust

It just occurred to me. Is this any different than Nike opening a branded store in a mall? Have we been looking at Amazon all wrong? Maybe Amazon is not a retailer? Maybe it is a mall? What is the difference between Amazon and a mall other than the real estate?

Naomi K. Shapiro
BrainTrust

Maybe the fact that it’s the most omnipresent “mall” that ever existed, accessible, voracious, on-the-prowl, and threatening to every retailer in existence?

Gene Detroyer
BrainTrust

Well described!

J. Peter Deeb
BrainTrust

Nike did what was right for Nike! Their retail customers will take a hit but they will be one step closer to reaching more of their target audience while potentially reducing their counterfeit merchandise problem. With Adidas and Under Armour increasing market share it was critical for Nike to be more aggressive in exposing their products through the online leader.

Larry Negrich
BrainTrust

In the short term this should be a zero-sum game for Nike. The potential damage of this arrangement is to Nike’s current retail partners as they lose sales to the Amazon channel. In the long term I would expect more retailers to look to replace Nike products when possible with store brands or other competitive alternatives.

Kai Clarke
BrainTrust

Why wouldn’t Nike sell directly to Amazon? This is perhaps the better question. Thousands of major brands already do this. What is it that has held Nike back from doing this that other key brands have been doing for years? This is perhaps the better question, and one which Nike has to resolve internally before it gets together with Amazon. I am confident that there are many perceptions that are not reality in Nike’s case …

Martin Mehalchin
BrainTrust

I work with a lot of clients in this category, so I could write a book about this.

This is big news simply because Nike has always been known for tightly controlling its online distribution to protect both brand and pricing power.

The apparent change in strategy is likely due to a combination of factors. First, overall softness in the market as evidenced by rampant discounting across the category so far this year. Second, the disappearance of major channel partners like Sports Authority. Finally, while Nike has been focusing on its own Direct channel, it’s not growing fast enough to offset headwinds in the rest of the business and they have been slow to improve what is still a lagging eCommerce experience (although it’s better on mobile than it is on web).

This is unadulterated bad news for the Foot Lockers and Finish Lines of the world. They will have to focus more than ever on retaining and building relationships with their core customers via better loyalty offerings and unique shopping experiences.

Harley Feldman
BrainTrust

Selling on Amazon will be good for Nike. I have been a Nike running shoe customer for 15 years. In the early days when I knew the shoe and size I needed, Nike refused to allow me to purchase through online retailers as their competitors did due to “making sure the customer received a quality product.” This cost Nike sales, but they were doing well and wanted to control the market as best they could.

Now they have seen declining sales and realize they must respond to the market. Millennials who have grown up on smartphones and Amazon love to purchase that way and do not care to have to go through the Nike site (or other brands). Nike will become another “approved” brand to those Millennial consumers.

The challenge for Nike as with other brands is that sales on Amazon may impact negatively sales from other outlets including retailers. The other retailers will need to make their in-store or online presence provide a better experience or service than the Amazon site, or they will lose the consumer for future sales.

Jeff Miller
BrainTrust

Nike and a lot brands have a tough decision. Spend money to compete against Amazon digitally and lure shoppers off Amazon to drive direct sales to their websites or go where the shoppers are on Amazon for lower margins. As a lot of large CPGs and beauty brands can attest — if they are not on Amazon — other brands will be who will gladly take those sales. I think this is the right move by Nike, but they should control the products on Amazon tightly and try to give shoppers a reason to buy on nike.com where they control the entire experience from device to doorstep.

Ricardo Belmar
BrainTrust

With Nike’s 2 biggest competitors already on Amazon directly, they really need to do this to stay competitive. Especially when many of their existing retail partners aren’t doing well. That said, Nike should consider the assortment they make available on Amazon vs other retailers. They may want to offer exclusivity for certain products to maximize their sales channels.

Overall I see this as a win-win for both Amazon and Nike. For other retailers, I suppose I could paraphrase a quote from Scott Galloway — this is bad news for any retailer whose name isn’t Amazon. Product exclusivity may be something those retailers come to Nike requesting to help them avoid losing sales to Amazon, otherwise they’ll be in price matching territory.

Naomi K. Shapiro
BrainTrust

Nike beware! This move will obviously be bad for other retailers. But also beware that others have either left (or joined) Amazon to find their brands compromised in other ways (counterfeiting, the increased competitive information and leverage this gives to Amazon, etc.). Maybe times are changing back, but there are downsides to consider when you work with Amazon. For example, see “Why Would Retailer Like Birkenstock Walk Away From Amazon?

Min-Jee Hwang
BrainTrust

Joining Amazon’s brand registry program is a great move for Nike. With this, Nike will be able to control its brand and message, while gaining consumer purchasing data — a win-win situation. Entering the Amazon marketplace means Nike and Nike resellers will have to keep an even closer eye on pricing and discounting behavior over time. Nike also needs to optimize their product assortment for the Amazon marketplace. Unfortunately, this isn’t the best news for other retailers selling Nike products. Amazon Prime offers 2-day free shipping, while most online retailers have longer shipping times and a free shipping minimum. In order for retailers to maintain their Nike sales they’ll have to focus on their core customer relationships and offer more incentives to keep shoppers in store or checking out through their online channels.

Alex Senn
BrainTrust
A few too many people are missing the point on what happens when you put your brand on Amazon. Almost right off the bat, they own your brand/product/keywords etc. for eternity. Search for a product on Amazon that was delisted months ago. Very often that product will show up in search, and it will take you to that product page, without the product, and there will be a similar or recommended item there for Amazon to steal the purchase, forever rendering that brand incapacitated by Amazon with their dominant SEO. On the other hand, while this could be a devastating move for Nike if mishandled Nike could release a separate collection of shoes on Amazon, which it provides only a limited selection giving its other partners more space for unique product. This would be the wise move for Nike (if its new master, Amazon, allows it). Third note after a glass of wine, it’s time for many retailers to get their [act] together and regain some ground. Retailers such as Macy’s, J.C. Penney, Crocs, EMS, etc. should be employing their collective buying power to redesign a marketplace experience empowering their customers with an entirely new way to shop that actually… Read more »
Franklin Chu
BrainTrust

The Nike/Amazon deal could only happen to Amazon, the omni-mall that is confident enough to be the only digital channel for all brands. Amazon gave Nike what it really wants: the ability to control all channels, synchronize its pricing strategy and shift traffic to channels with the highest margins. However, this isn’t necessarily what Nike really needs. Angry retailers could go to the extreme to feature other brands that have better terms and offers, which could challenge Nike’s share in the market. In China, Alibaba is also doing similar things but it has yet to make progress like Amazon. It’s terrifying to think these giant marketplaces could eventually become the “sole” channels for brands and eat away at retailers’ already-slim margins.

wpDiscuz
Braintrust
"Like Wall Street and so many others, Nike’s betting on the lead horse."
"I think this is the right move by Nike, but they should control the products on Amazon tightly and try to give shoppers a reason to buy on nike.com."
"Beware that others have either left (or joined) Amazon to find their brands compromised in other ways."

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