Two of the world’s largest brands, Nike and Amazon announced a new partnership in June, 2017. After years of holding out, Nike will now be selling its products directly on the Amazon marketplace. For years Nike presumably felt that it was above selling directly on Amazon. So what changed? We’ll explore 2 main reasons why Nike’s move was the correct, if not inevitable one.
1. Crackdown On Third Party Sellers
Nike is already the number 1 selling clothing brand on Amazon, so what has changed with Nike’s new relationship with Amazon?
Until now all of the Nike gear sold on Amazon was done by third-party resellers. According to one reseller, “That’s how I make my money. Amazon is the No. 1 marketplace. Nike is the No. 1 brand. If they’re not in bed together, that’s my opportunity.” Nike is not alone. The proliferation of third-party sellers on the site has led to products from brands such as The North Face, Patagonia and Chanel being sold on Amazon, even though they don’t authorize the sales. This ultimately undermines their pricing and distribution strategies. Third party sellers increase the risk that the goods are counterfeit which only adds insult to injury – not only does the company not get any revenue from the sales but the brand reputation can be severely tarnished.
As part of the agreement with Nike, Amazon has suspended third-party sales of most Nike products as of July 13. In short, Nike previously resisted selling directly on Amazon in order to maintain control of its brand, however, by not acting it ended up giving that control to third-party sellers on the site. Now, by selling directly, Nike regains some control of its brand and is able to capture more sales.
2. Access to consumers
According to an Internet Retailer Survey, more than half of respondents said that they went directly to Amazon when shopping online. What’s more, in 2016 Amazon accounted for 43% of all online sales in the United States. To say that they are a big player is a bit of an understatement. Under Armor and Adidas have been selling on Amazon with tremendous success for years and are 2 of the top 5 brands on the ecommerce behemoth. Adidas’ North American sales growth can be attributed in part due to their partnership with Amazon. In 2014 an Adidas executive told the Wall Street Journal that, “Amazon is the best, without any comparison, transaction platform in the world.”
While Nike is undoubtedly a leader in sports marketing, they were losing market share by opting not to join forces with the world’s largest e-commerce platform. Over the past decade traditional brick and mortar retailers such as Sears, Sports Authority and Macy’s have steadily seen their market erode at the expense of online sales. While, Nike was relying on its existing marketing formula , it’s competitors were quick to join forces with Amazon and as a result they were able to gain market share.
Let this be a lesson to us all, as the saying goes in marketing, if you can’t beat them, join them. No matter how big you get, your work is never done, and we need to constantly be on the lookout for new ways to reach customers. Can you think of ways that your competitors are reaching consumers that you’re not taking advantage of?