Connected CommerceNovember 21, 2019

What Nike’s Amazon Exit Means for Retail

By SHAMONTIEL VAUGHN | Contributing Writer‍

[RETHINK Retail] — For some companies, Amazon is an obvious outlet to sell their products. These private and/or lesser-known products needed a more public platform. Sure, they could have sold the products solely on their own via their eCommerce sites. But if 89 percent of consumers are more likely to buy from Amazon, why not just join their marketplace?

Feedvisor reports that $1.86 trillion was spent worldwide on the top 100 online marketplaces (Amazon, eBay and Walmart) in 2018. With Amazon leading the pack, nearly 47 percent of the survey respondents confirmed that they also sell their products on their own websites. (Only 13 percent give their sole attention to Amazon.)

But for well-known brands like Nike, is Amazon really necessary? Nike has made a name for itself since 1964. Amazon didn’t come around until 30 years later in 1994. And when the company was incorporated, the founder was more interested in selling books online. Even during the early 2000s, Amazon was focused on inventory for parents.

Meanwhile, in the ‘90s, Nike was focused on being the top seller in athletic footwear, especially after its net income dropped to $163.8 million from $253.1 million. Even when ‘90s teenagers were opting for hiking books and dressier brown shoes instead of athletic shoes, Nike apparel was still high on the shopping list, according to the New York Times.

And in 2019, Nike is still a force to be reckoned with and knows it. That’s one of the reasons that they decided to do something that may seem unpopular: Nike left Amazon’s website.

 

Nike leaves: Should other major name brands follow suit?

Experienced brands like Nike remember a time when they could do without third-party marketplaces to sell their products. Generation Xers and baby boomer customers remember it, too. But for millennials and Generation Y, who often check out the price of an item at a retail store and then compare the price online, Nike’s decision may seem like a step backward.

However, for Nike, this may help consumers pay more attention to Nike products instead of being distracted by all of its lower-priced competitors. While Amazon sells apparel from the who’s who in athletic apparel, fashion, beauty, technology and even groceries, the online marketplace has a plethora of its own private label offerings. Scrapehero (via Forbes) guesstimates Amazon’s private labels at approximately 6,825 products across 100 distinct private labels. And with 4,674 of them in the apparel category, well-known apparel companies are left hoping their loyal customers still choose them over Amazon’s brands. Or, they leave altogether and hope each company’s loyal base follows close behind.

Clearly Nike’s new CEO John Donahoe—and the third leader in the brand’s entire history—believes Nike can do it on its own again. After a two-year relationship with Amazon, users will not see the limited assortment Nike pilot that was launched in 2017.

“I think that other brands are going to be looking at [Nike’s decision] and saying, ‘Well, maybe we don’t need Amazon. … Maybe we don’t want to compete against Amazon’s private brands that Amazon can show favor to in the digital space anytime they choose,’” said Carol Spieckerman, president of Spieckerman Retail, on a recent episode of the Retail Rundown podcast.

“Amazon can distort the presence or significance of brands at will, because it controls the platform,” she continued.

Tony D’Onofrio, the CEO of TD Insights, understood Nike’s decision, but more so from a shopper’s perspective.

“Amazon is too focused on the buying and not on the shopping,” D’Onofrio said. “Shopping, to me, is really the inspiration, the discovery, the journey and getting entertained along the process versus just the clinical. [Amazon gives] you a place to buy immediately, Consumers get that gratification, but they [miss out on the] experience.”

Judging from Nike’s company statement, it is definitely all about giving customers that “experience” again.

“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. We will continue to invest in strong, distinctive partnerships for Nike with other retailers and platforms to seamlessly serve our consumers globally.”

 

When authenticism doesn’t match bargain deals

Amazon customers may be scratching their heads at this news. Nike already had an official website to sell their own products in addition to Amazon. So why not keep both and give shoppers options? Authenticism and direct-to-consumer purchases are two major reasons.

Some customers are passionate about only buying authentic products, even if they cost a little more. Other consumers are focused on a bargain. With Nike no longer acting as a wholesaler for Amazon, this could open the floodgates for Amazon’s third-party marketplace sellers to list Nike’s products online (or knock-off versions) for lesser rates. And if the third-party seller does not have quality inventory and/or good customer service, consumers may wag a finger at Nike and completely disregard the shady seller.

A casual browse through Amazon’s feedback section has a collection of people complaining as much about the seller as it does the products. And the online marketplace isn’t always the best at sorting through this feedback to see which is which, even if the listing is from a “Verified Purchase.”

And when it comes to pricing, knock-off versions or lesser quality options listed online may mean the company loses money.

And Nike is aware of this risk. According to the Bloomberg report, Nike has been recruiting third-party sellers to sell Nike products widely on Amazon’s site. Amazon has also created transparency codes so consumers can identify what’s fake and what’s not.

Will Nike’s official third-party sellers, Amazon’s transparency codes and Nike’s goal of improving shopper “experiences” be enough for the company to win big? Only time will tell. In the meantime, other brands will certainly be watching to see if it’s worth staying put on Amazon or logging their own collections off, too.