Just Do It – Nike Dunks on, or Rather Dumps Amazon
In 2017 Nike participated in a pilot program to test out selling a small sampling of its products on the Amazon e-commerce site. Now, in late 2019, Nike made the decision to end that relationship, one that will have only lasted a little over two years. This parting will mean that Nike will no longer sell any of its merchandise directly through Amazon.com.
In a Yahoo Finance interview with the President, Heidi O’Neil, she explained, “We have ended our pilot with Amazon — it comes back to being incredibly committed to amazing experiences for our consumers, direct relationships and building unbreakable relationships. We want to move forward and make sure we continue to innovate on our own platform.”
Nike’s separation from Amazon comes at a time when Nike has also made internal changes to its leadership. Heidi O’Neil has been President of Nike Direct for one year (working within Nike in the marketing department for 20 years). Mark Parker current CEO will soon be stepping down and taking on the role of executive chair and be succeeded by John Donahoe at the start of the new year on January 13, 2020. Donahoe was the former CEO of eBay and current chairman of PayPal, his experience with e-commerce and online payment systems will surely serve Nike well.
Sharing Customer Relations is not what Amazon was Built On
Nike’s shift away from Amazon serves the company’s larger mission to provide stronger customer relations. Using a direct-to-consumer (DTC) business approach, the aim is to sell more Nike products through its own website and stores – which is something not possible when partnering with Amazon.
Since making a purchase through Amazon, all points of communication begin and end and are funneled through its platform. If any third-party vendor (even Nike) required additional information from a buyer or wanted to reach out to establish more of a relationship with customer – this involves, at best, a shared information system as the customer is deemed, by Amazon, to be its own, regardless of what brand they are purchasing. This stranglehold of customer data allows for Amazon to keep control in the purchasing process from start to finish.
In addition, companies that sell on Amazon and have repeat business on the platform do not reap the customer relation benefits, instead Amazon asserts control of that customer relationship.
Nike’s status as a well-established brand fortunately does not necessarily need to rely on Amazon’s fast shipping and low prices in order to its attract customers – instead the company can focus more on its desired goals to bring about “unbreakable relationships” with those that sport Nike footwear and branded gear.
After Nike’s exit from Amazon, things can only get better: For Nike
Nike counterfeits and unauthorized sellers have always been a concern for the company and was a major discussion point prior to entering into the pilot program with Amazon. Brands that do not sell directly on Amazon are often faced with resellers filling that gap. Grey market goods and resellers with fake or counterfeit products have been a major problem with Nike related products – even conducting a simple Amazon search for Nike products will yield many a reviews that point out the above issues.
“The move shows us that strong brands realize that traffic driven to their own site is self-sustaining, more profitable, and actually brand enhancing, while traffic and incremental revue from Amazon.com is less profitable but also less brand enhancing.”– Randy Konik, Jefferies & Company ANalyst
Although Nike will cease listing on Amazon, the e-commerce site will still have third party sellers that hold Nike products available for purchase, which leaves the door open for problems relating to authenticity that customers will have to risk if they purchase on a site other than Nike.com.
The counterfeit issue within the Amazon marketplace has been such a rampant problem that another large name footwear brand, Birkenstock removed its products and no longer sell on Amazon as of 2016.
Nike, as one of the best known product lines to leave the online-selling platform is sure to affect Amazon’s future attempts of attracting other big name brands.
Randy Konik a Jefferies analyst spoke about Nike’s departure: “The move shows us that strong brands realize that traffic driven to their own site is self-sustaining, more profitable, and actually brand enhancing, while traffic and incremental revue from Amazon.com is less profitable but also less brand enhancing.”
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