Nike ends 2-year pilot test on Amazon, but can other brands afford to follow suit?

Global sportswear brand Nike will be pulling its products from eCommerce giant Amazon.?In a CNBC article, a Nike spokesperson said the brand now aims to pivot its focus towards enhancing customer experience through "more direct and personal relationships".?However, according to Nike, it will continue investing on other retailers and platforms. Nike did not respond to Marketing's queries at the time of writing.

Nike first partnered with Amazon in 2017, to run a pilot test by selling a limited product assortment on the eCommerce platform. According to Nike, the decision to put its products up on Amazon initially was in?exchange for stricter policing of counterfeits and restrictions on unsanctioned sales of its products.

Two year on, in an earnings call in September this year, Nike's EVP and chief financial officer Andy Campion said the brand's long term goal is to reshape the marketplace to one in which the brand is connected more directly with the consumers and members. This would be done through NIKE Direct, which is a new strategy for online sales and creates product based on analytics, and strategic wholesale partners.

This has led to speculation of whether other brands would follow suit. In a conversation with Marketing, many industry players raised similar questions around Nike's exit from the Amazon platform.

Stridec Worldwide?s founder Alva Chew said?Amazon still remains as one of the biggest platform for up and coming brands which are looking to grow their online presence and market share. He added that for newer players there are more pros than cons to being on the Amazon platform.

Hence, this definitely would not be a move for the newer players in the market. However, this might trigger major established players to reevaluate its position and presence on Amazon. He added:

I won't be surprised that in the months to come, a few more notable brands choose to make the same decision.

Chew added that Nike's move to break up with Amazon is also an?indication that having exposure to a larger segment of the consumer audience does not always translate to stronger sales and profitability. Sometimes, being on external platforms also means that a brand is unable to provide the overall experience in line with its own brand ethos. Chew said, "Especially for a major brand such as Nike, there are significant limitations to the kind of online experience that they can deliver via an online marketplace such as Amazon which might not add value to the brand experience that Nike wants to give its customers."

A maturity in retail?

Taking a different stance on Nike's decision was?Kyriakos Zannikos, CEO of Digital Commerce Intelligence at ECHO Commerce Consulting. Zannikos said that on one hand,?the retail history books will mark this down as a "classic lose-lose" situation for the protagonists, but on the other hand it signals reaching a new maturity stage in the retail world.?Nike, as such, will either prove the hero or the martyr for the rest of the brands that negotiate partnership terms with Amazon.

However, Zannikos added that may not be wise for brands to follow Nike's move which he labelled "unnecessary" as terms can always be negotiated.

"Amazon is known for its fierce and inflexible commercial terms, but is almost unexplainable that it wasn't able to find some common commercial grounds with one of the world's biggest brands. Nike on the other, is making a very bold and risky move by giving up the world?s largest pool of shoppers," he said, explaining that:

Even shoppers lose here, as losing a shopping channel option is equivalent to losing some bargaining power.

According to Zannikos, despite Nike pulling its products off Amazon, Amazon?s shoppers will still be able to buy Nike apparels and sneakers from other sellers which may potentially be counterfeit - an issue that led to Nike striking up this partnership in the first place.

"The real market impact of that move will be slow and potentially unnoticeable in the bigger scheme of things. But the impact news headlines will brings will be significant to the commercial partnership agreements that are currently written between Amazon and brand partners," he added.

For Larry Lim, CEO of SearchGuru, despite brands creating their own dedicated eCommerce platforms, marketplaces provide a complete and advanced ecosystem that brings traffic to the retailer.

"I think the best approach is to go multi-channel, and do both as Amazon provides a one-stop mega mall, brand/product discovery and user reviews. This would appeal to a certain customer segments due to their buying behaviour," he said.

What to consider?

Lim also echoed the sentiment that?having an official store on Amazon would also help pull customers away from unauthorised retailers on the platform. However, this may come with?lower margins due to discounts and losing the customer to a competing brand through product recommendations on the marketplace itself.

"There's also the question of brand positioning - some brands feel that listing on marketplaces would cheapen their brand," he added.

Stridec's Chew said it is important to consider the impact to its overall online sales, as well as the implications on logistic arrangements. Moreover the brand team needs to keep in mind its confidence levels if it were to move away from marketplaces as they often have aggressive discounts/promotions which drive purchase.

But in the case of Nike, Chew added that while it may lose some customers to rival brands who are still selling on Amazon, loyalists will follow and buy from Nike's own eCommerce site. "Being one of the most valuable brands in the world, I think Nike has enough brand clout to contain and minimise any potential downside to the departure," Chew added.

Recently,?Nike unveiled its first subscription shoe service for children, Nike Adventure Club, which allows them to regularly select Nike and Converse shoes for the right fit as their feet and tastes evolve.

The company noted that the experience of shoe-shopping for young children can be ?deceptively complex? as they encounter growth spurts and many children are unable to articulate the shoe size or design they want. According to multiple media reports quoting GM of Nike Adventure Club, Dave Cobban, Nike has been working on this subscription service for two years.

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