November 14, 2019
The split reflects a massive pivot in Nike’s retail strategy. It also follows the hiring of ex-EBay Inc. Chief Executive Officer John Donahoe as the company’s next CEO, effective January 13, 2020—a move that signaled the company is going even more aggressively after e-commerce sales, apparently without Amazon’s help.
Indeed, the footwear titan says the move is just one piece of its plan to shift to a “more direct, personal” retail experience.
Specifically, the company said in a statement, “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.”
Nike said it will continue to use Amazon’s cloud-computing unit, Amazon Web Services, to power its apps and Nike.com services, Bloomberg reported.
Amazon, through a spokeswoman, declined to comment. The company has been preparing for the move, according to two people familiar with the matter. It has been recruiting third-party sellers with Nike products so that the merchandise is still widely available on the site, they said. Amazon has also been working to stem the flow of counterfeits on the site through various initiatives, including one project that lets brands put unique codes on their products to make it easier to identify fakes.
Nike shares rose as much as 1.4% in New York trading Wednesday, while Amazon was off as much as 0.6.
The question now, according to Bloomberg, is whether other Amazon partners follow Nike’s lead. The financial news outlet said, “Few other brands possess the kind of muscle Nike has, so it may be harder for them to leave.”
“Nike has enormous reach and its products are in demand, so it can afford to be selective about where its products are distributed because customers will come find Nike where it is offered,” Neil Saunders, managing director at GlobalData Retail, said in an interview. “I don’t think as many brands can be as selective as Nike.”
For years, the only Nike products sold on Amazon were gray-market items—and counterfeit—sold by others. Nike had little control over how they were listed, what information about the product was available and whether the products were even real.
That changed in 2017, when Nike joined Amazon’s brand registry program. Executives hoped the move would give them more control over Nike goods sold on the e-commerce site, more data on their customers, and added power to remove fake Nike listings. The news of the Amazon tie-up, which Nike executives called a “small pilot,” sent shoe-retailer stocks tumbling and left many wondering if other major Amazon holdouts would quickly follow.
But Nike reportedly struggled to control the Amazon marketplace. Third-party sellers whose listings were removed simply popped up under a different name. Plus, the official Nike products had fewer reviews and, therefore,received worse positioning on the site.
Analysts said physical sporting-goods retailers would benefit from Nike’s departure from Amazon.
Research contact: @business