Nike has "agreed to sell some of its products directly" through Amazon, a "concession by the sneaker giant that it can no longer afford to ignore the online retailing behemoth," according to a source cited by Germano & Stevens of the WALL STREET JOURNAL. While Nike sells its shoes and sportswear through department stores and specialty retailers, it has "refused to sell directly to Amazon, fearing it would undermine its brand." But with "traffic to traditional stores on the decline and chains like Sports Authority disappearing, Nike has been ramping up efforts to sell directly to consumers, especially its own e-commerce efforts." Both of Nike's biggest rivals, Adidas and Under Armour, already "sell some of their products directly to Amazon" (WALL STREET JOURNAL, 6/22). REUTERS' Gayathree Ganesan cited a Goldman Sachs note saying that Nike "could build an additional" $300-500M of revenue in the U.S., or 1% of its global sales, "through its expansion as a wholesale dealer on Amazon." Nike "could weed out excess, discounted inventory available at the marketplace through third-party retailers and sell more full-price products through the online channel." Nike has been the "worst performer among Dow stocks over the past three months" (REUTERS, 6/21).
WHY THE MOVE? The FINANCIAL TIMES' Jessica Dye noted Nike through an Amazon partnership "would also get a more direct line to millennials, who increasingly consider Amazon their preferred destination for fashion purchases." That is "especially true for male millennials" (FT.com, 6/21). CNBC's Sara Eisen cited the Goldman Sachs note as saying that Nike could also get "more preferential and priority treatment on search results" ("Squawk Alley," CNBC, 6/21). Pro4ma Founder & CEO Liz Dunn said Nike going on Amazon “allows it to control its brand imagery.” Dunn: “Nike is a very innovative, forward-thinking company. They've aligned themselves with more of a tech mentality than a consumer mentality." But she added, "It's a tough break for some of the retailers that sell Nike” (“Closing Bell,” CNBC, 6/21). Fortune Magazine's Phil Wahba tweeted "Nike-Amazon news cld be very painful for dept stores: last yr $NKE generated $800 million in sales for Kohl's, also huge box at $JCP $M $KSS." SapientRazorfish Senior VP/Commerce Jason Goldberg: "Under Armour already there. Honest came on this week. Nike already on $BABA and focused on DTC, so Nike on Amazon just another domino" (TWITTER.com, 6/22).
RIPPLE EFFECT: The AP noted sporting goods chains became the "third sector in less than a week that has been ravaged over fears that Amazon would soon become a disrupting force." But it also "doesn't take much to spook investors in the sporting goods sector." Since the '08 recession, the years have "not been kind" (AP, 6/21). The FINANCIAL TIMES' Dye noted the news sent shares of Dick's Sporting Goods down 6% yesterday. Foot Locker shares fell 6% as well (FT.com, 6/21). N.Y.-based retail advisory Gordon Haskett analyst Charles Grom noted department stores that offer Nike products "would likely also suffer." He said that JCPenney and Kohl’s "would be two of the department stores most directly affected" (WSJ.com, 6/21). In N.Y., Lisa Fickenscher cites sources as saying that the "share selloff of sports retailers is premature, because Nike would not sell its premium products to Amazon." More likely to be "hurt by the deal are department stores." Meanwhile, if Nike strikes a deal with Amazon, it will "likely include a requirement for Amazon to crack down" on third-party vendors -- "as it has already begun to do" (N.Y. POST, 6/22).
