Just un-do it: The risks of Nike cutting ties with Amazon
When computer scientist John Wainwright purchased Douglas Hofstadter’s Fluid Concepts and Creative Analogies on the 3rd of April 1995, he likely had no idea that he would also be ordering a unique place in history. He was the first customer to purchase a product from Amazon.com.
In the near-25 years since this first sale, Amazon has grown to revolutionise the world of ecommerce and retail. The company now has a market cap of around $755 billion, connecting brands, retailers and consumers around the globe. But for some brands, questions are being raised over whether Amazon is the right environment to reach audiences.
Nike is the most high-profile of these brands. Following similar moves from Birkenstock and IKEA, the US sportswear giant announced last month that it would cease all sales through Amazon, ending a trial that began in 2017 to sell products via the website in exchange for stricter policing of counterfeit products.
Today, almost 50% of all sales on Amazon come from third-party sellers, with over 1 million new sellers joining the marketplace this year alone. For brands like Nike, the amount of third-party sellers that use Amazon to sell counterfeit goods is considered dangerous – so much so that the White House issued a trade memorandum earlier this year which sought to protect US brands against counterfeiting in online marketplaces like Amazon, eBay and Alibaba. According to the Counterfeit Report, more than 150,000 phony products have been identified on Amazon in the last seven years.
Perhaps Nike could have instead benefitted from Amazon’s Transparency programme – a scheme in which all products are stamped with a barcode which proves their legitimacy. However, this means that every product Nike creates, not just the ones that go through Amazon, needs to be equipped with this barcode. For a company the size of Nike, with factories and offices spread across the entirety of the planet, this presents a huge logistical challenge.
This isn’t to say it is an impossible challenge for a brand with Nike’s power. But it is an undertaking that has made the brand weigh up the value of being on Amazon – with Nike ultimately deciding it would pull away from the marketplace as it looks to take complete control of its brand.
This is potentially a risky decision for a multitude of reasons. There is still a lot to be gained from having brand presence on Amazon – even for one the size of Nike.
It’s important to remember that for brands and retailers, Amazon is more than just a sales channel – it’s an invaluable research tool. Today around 79% of all ecommerce sales use Amazon as part of their journey, and the insights Amazon gives into the purchase journey is second-to-none. Amazon has the most valuable data in the world because it tells merchants what people want to buy. Over 66% of product searches now happen on Amazon – compared to only 20% on Google.
The storefront is constantly offering retailers new tools and insights into how browsers are engaging with their brand and products. Brands can use these insights to drive traffic to storefronts and upsell products – this is an area that is dramatically underutilised by brands.
As Nike moves away from Amazon, the marketplace has recruited third-party sellers with Nike products so that the merchandise is still available on the site. By having a presence on Amazon, Nike had the opportunity to control how their brand is being represented even if it wasn’t a profitable sales channel for the brand – the majority of Nike’s customers would use Amazon for research before purchasing directly from a Nike store. It is incredibly important to meet these customers with first-party, brand-centric information during their research phase.
When it comes to product launches, the traffic on Amazon speaks for itself. Amazon is an incredible vehicle for getting products in front of people. It’s important for Nike to own a store to ensure their brand is represented correctly.
Perhaps a better strategy would be to make the counterfeiting issue common-knowledge. By raising awareness of this as an issue on Amazon, Nike could shift consumer perspectives when browsing for Nike products on Amazon, whilst still maintaining the valuable first-party presence and keeping the rich data and user insights.
Really, being a brand the size of Nike is Nike’s biggest problem. The reality is that they will face problems with counterfeits wherever they go. By cutting Amazon out, Nike risks missing out on much more than just another sales channel.
Jack Cooper, Amazon strategy specialist at Croud