Nike's Partnership With Amazon Reflective Of Power Shift In Changing Marketplace
Behind Nike's decision to "reverse course" and sell some products directly through Amazon lies a "dramatic shift in the balance of power" between brands and the e-commerce site, according to a front-page piece by Stevens & Germano of the WALL STREET JOURNAL. The "explosion of third-party sellers on the site has led to authentic goods from companies such as Nike" being sold on Amazon, even though they "don’t authorize the sales, undercutting their grip on pricing and distribution." Data from Morgan Stanley shows that even though Nike "didn’t send Amazon its products either directly or through approved wholesalers, Nike is the most purchased apparel brand on the site." A source said that Nike "agreed to start selling some products directly to Amazon in exchange for stricter policing of counterfeits and restrictions on unsanctioned sales." But Amazon still "won’t be allowed to sell certain Nike items, including sneakers and apparel." A study by market research firm Cowen & Co. showed Amazon has "pulled even" with Foot Locker as the "preferred U.S. retailer for buying sneakers." Adidas CEO Kasper Rorsted "estimates that nearly a fifth of the sporting-goods market is now online." Stevens & Germano note the bankruptcy of Sports Authority, one of Nike’s "biggest wholesale clients, unleashed a flood of Nike products on Amazon." Sources said that in recent months, Nike "realized it was losing negotiating leverage to argue for better brand presentation or eliminate counterfeits as long as Amazon could make money off unsanctioned sales of its product." Another source said that this "triggered internal conversations" among senior Nike execs about its relationship with Amazon. Meanwhile, a source said that the recent agreement is "likely just the first step in a broader partnership, although Nike remains concerned about how its products will look" on Amazon (WALL STREET JOURNAL, 6/29).