The unexpected move comes as Nike's new CEO, veteran online retailer John Donahue, begins to make his mark on the company's focus on e-commerce
The unexpected move comes as Nike’s new CEO, veteran online retailer John Donahue, begins to make his mark on the company’s focus on e-commerce. Donahue previously was CEO of eBay and serves of the board of PayPal.
If it was a big deal that Nike finally started selling on Amazon, it’s an even bigger deal for both companies now that it has changed its mind. Here’s why:
According to CNBC, Nike generates $11 billion (or 30 percent) of its overall revenue from direct-to-consumer channels including online and at its flagship retail stores. It’s not clear how much Amazon represented in terms of business for Nike, but the athletic apparel company was selling products directly to Amazon instead of allowing its products to be sold by third-party resellers on the site.
Nike’s move demonstrates that it thinks it’s better off controlling the shopping experience for its customers, and shows that it isn’t worried that it will lose sales as a result of not making its products available on Amazon. In a sense, Nike is saying that it doesn’t need Amazon in order to reach consumers.
That makes sense considering Nike is a highly sought-after and recognizable lifestyle brand that customers are willing to go out of their way to purchase. In that regard, the company is probably right that customers will simply transfer their purchases to Nike’s site or another retailer that carries the company’s products.
Nike already has over 1,100 stores where it can provide the type of high-touch customer shopping experience that supports its brand perception. The company also reported a jump of 35 percent in online sales over the last year.
For Amazon, the stakes are even higher, and not because Nike represented some enormous amount of revenue for Amazon, but because of what it represents in terms of the balance between brands and the platforms that sell their products.
If other companies follow suit, Amazon could see a significant exodus of valuable brand partners. Of course, Amazon isn’t going anywhere, it already accounts for roughly half of all e-commerce transactions.
But this isn’t a small point, especially considering that many sellers are already anxious about the fact that copycat and counterfeit products are widely sold on the site, often next to their authentic brands. In addition, Amazon has continued to expand its own in-house brands, often using the success of resellers as a cue to launch its own competing products.
Every business has to make a decision about the trade off between having access to the customers that come with a platform like Amazon, and the cost of building your business on that platform. Along with those customers come policies and practices that aren’t always in the best interests of companies like Nike.
Not to mix metaphors, Nike’s move is not unlike that of Disney’s recent launch of its own streaming video platform to house all of its own content. As a result, it has pulled much of the high-value content that used to be available on competing platforms like Netflix or Amazon Prime Video.
That move is widely seen as a part of a greater streaming war, highlighting the stakes for everyone involved. In the same way, I wouldn’t be surprised if we’re witnessing the beginning of another time of online battle. Considering that we’re entering the biggest shopping season of the year, there’s no question that for retailers, the stakes are just as high.
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