Here is what I wrote about the Nike/Amazon “pilot program” two years ago, when the buzz around this deal began. Things turned out pretty much as I expected.
Nike began this pilot under the premise that Amazon would clean up its marketplace, where unauthorized and unaccountable sellers trade in Nike products. Sometimes these products are not as advertised. It was an admirable goal, but one that proved impossible to achieve.
As I wrote in 2017, “Amazon marketplace is a challenging business for brands. Since the sales are done by so many individual sellers, the brand has no control over their image, pricing or quality. Brands across the spectrum are trying to find a way to rein in the marketplace.”
From the onset of this pilot program, it was apparent that no improvements were being made on Amazon, as unauthorized Nike products continued to be sold there. As I predicted, the product assortment sold by Nike on Amazon was very moderate and focused on opening price-points, as Nike sought to protect itself if the pilot failed.
Some analysts have said that ending the Amazon program will benefit Footlocker, but in my opinion nothing can be further from the truth. If there are beneficiaries here, it will most likely be mid-market retailers like Kohl’s and Famous Footwear, as the Amazon assortment most closely aligns with those types of retailers.
Watching Amazon’s Nike sales through NPD’s receipt-based Checkout lense, its sales began to decline during the spring. My assumption is that Nike was intentionally pulling back on Amazon and anticipated this announcement.
I do not believe that this decision will have a material impact on Nike’s results. Nike will be able to easily make up the shortfall through their direct-to-consumer platform and with their best partners. Given Nike’s best-in-class e-commerce platforms and dynamic use of apps, Nike will not skip a beat.
Nonetheless, the problems inherent in Amazon’s marketplace remain for Nike. It will be interesting to see their next move to try and clean up the marketplace “wild west.”
Will other brands follow suit? Some brands need the traffic on Amazon to drive results, regardless of what it does to their brand image. But brands with a well-developed and first class e-commerce platform probably do not need to sell on Amazon. The next few months should be interesting to watch.