The strategy is planned to be put in place in order to combat knockoff goods on the world’s largest e-commerce site. Amazon’s brand registry program will allow Nike to flag listings of counterfeit products and hopefully push sales upward.
The arrangement hasn’t been publicized by the two companies as of posting time, but an inside source who asked to stay anonymous has revealed Nike’s plans of selling selected goods directly on Amazon. This approach will let the athletic brand have better control over how their products are sold online and weed out fake goods sold by third parties.
Because of the popularity of footwear from the brand, counterfeiters take advantage and sell knockoffs (that look scarily similar to original ones at first glance) online. This has triggered Nike to become more aggressive when it comes to policing online sales of these fake goods.
Prior to these news, Lindsay Drucker Mann, an analyst from Goldman Sachs Group Inc., has already stated that there was a huge possibility for Nike to develop a stronger relationship with Amazon. At the moment, Amazon’s Zappos site has Nike products on offer, but not on their main site.
Concrete details for the partnership between the two companies are still unclear as of now, but recent reports have already caused stocks of other shoe retailers to tumble. Foot Locker’s stocks went down by 11 percent, Finish Line Inc. by 5.9 percent, and Dick’s Sporting Goods stocks are down by 9 percent. Stocks of European shoe retailers, Sports Direct International Plc and JD Sports Fashion Plc, also got hit by the recent Nike/Amazon partnership news.
On the other hand, Nike’s stocks rose by 1.8 percent, bringing prices up by $52.49 on Wednesday, bringing their gain this year by 3 percent. As for Amazon, their stocks went up by 0.6 percent, at $998.70.
This partnership of Amazon is part of Nike’s latest business strategy to boost sales by selling directly to consumers and in order to revive the slow growth of the company that has affected their stock prices. In the past week, Nike announced a total overhaul in their strategies which included letting go of around 1,400 employees to focus on direct selling instead. However, the athletic brand’s wholesale business, selling to shoe retailers such as Foot Locker and Dick’s Sporting Goods, is still the biggest moneymaker for them, making up about 75 percent of their yearly revenues. But with the rise of online shopping, shoe retailers are a bit woeful about the future, as direct-to-consumer revenue has risen to 18 percent during the last quarter, which is more than three times the growth rate of top-line revenue.
“Taking this step would give Nike direct economic exposure to a large and fast growing distribution channel, while improving the brand presentation and expanding access to millennial shoppers. We expect pressures on bricks and mortar retail for the foreseeable future to result in pockets of inventory excess. However, it would help Nike to make its brand more visible by working with Amazon to control inventory from unlicensed dealers,” said Drucker Mann about the partnership between Nike and Amazon.
This deal would really help Nike clean up unlicensed and counterfeit goods that are being sold on Amazon through third-party sellers. This will also let the company have the upper hand against Under Armour, which already has their products selling directly via Amazon, and provide Millenial shoppers better access to their products. Additionally, this move has the possibility to boost Nike’s revenue by 1 percent and motivate other brands to strike similar deals with e-commerce websites.
How does selling directly on Amazon work for brands?
When brands work directly with the Seattle-based company, they have the freedom to flag violations and have counterfeit products removed from the website. Amazon is reportedly aiming to develop an interface that will be able to detect knockoff goods prior to even getting published on their website, according to an inside source.
As of 2017, there are about 2,000 brands that have their products registered in Amazon’s program including Johnson & Johnson, Clorox, Toms, Procter & Gamble, Under Armour, and Victoria’s Secret.
The company’s efforts to combat counterfeits seem to be working so far, with Birkenstock USA being one of the first that lauded Amazon’s system. Last year, the sandal-maker has annpunced that they would stop selling their products on the website due to fakes from third-parties, but as of Wednesday, a representative for the company stated that they had “seen improvements on the Amazon marketplace addressing our core issues of unauthorized sellers and counterfeit goods. As a result, we have continued to allow select third party sellers to list Birkenstock products on Amazon.com in the U.S.”
Nike actually already has their products being sold on Amazon, albeit, via third-party and unlicensed dealers. By selling directly on the site, they could accumulate an additional $300 million to $500 million in the United States alone, or about 1 percent of their global sales. This is made possible by Nike having the power to have excess and discounted inventory available via third-party sellers on Amazon removed and instead have the capability to sell products at full-price.
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