Or why the departure of Nike from the platform is situational and put in context.
All the media are talking about it. From Figaro to Echos, and french TV, you could not miss the news: Nike no longer wants to sell its products on Amazon and is withdrawing from the platform, ending the transition to a partnership signed in June 2017 by the American giants. The contract was as follows: If Amazon implemented a less permissive anti-counterfeiting policy than it was then, Nike would sell a selection of its products there. Fast forward two years later: dissatisfied, Nike backtracked.
At a time when Amazon is seen and is becoming increasingly popular, it is not surprising that such news is attracting media attention. A "fight" between two colossi, two disproportionate economic forces is a scenario whose strings are simple to exploit as its protagonists are renowned. So we hear about it! Nike would leave Amazon, without looking back. We would almost conclude that in the end, Amazon is not that essential…
However, this departure is fine is well to put in a specific context. As Amazon experts, we deemed it necessary to respond to this news, to take our gaze a little further and to try to demystify this rupture… which is nothing other than the result of a brand strategy and the confrontation between financial juggernauts. Let's come back in a few points on this separation, why it is not applicable to another situation than precisely this one and what it will imply according to our experts.
Nike weighs $ 120 billion in market capitalization. The figure should already be telling. It is a firm with an astronomical strike force, which has its own distribution networks, online and in store. On the 2018-2019 financial year, online sales represented 15% of its turnover. What it means: First, that Nike makes most of its sales in physical stores. On the other hand, even if the figure is considerable, that Amazon represents only a derisory part of this 15%. Worldwide, Nike operates more than 1,150 stores. Well established, it is able to do without Amazon. Its products are in demand and as a result, it can afford the luxury of choosing its distribution method.
For Bizon experts, the enormous visibility that Amazon offers is therefore potentially less relevant for the firm.
More than that, it is the direct result of a change in its consumer relationship strategy, coinciding with the arrival of John Denahoe, former eBay member, as general manager. To put it differently: there is very little chance that you will be in the same situation (if you are: call us, we have nice things to do together! But if you want to develop on Amazon , we have content for you).
Nike's communication is licked, tied up, under control. Over the years, the brand has been able to refine its positioning, find its audience, and seek out millennial techwear fans, Sunday sports aficionados as well as professional athletes. Alongside Under Armor and Adidas, Nike is considered to be a benchmark in terms of sports equipment. So talking about Nike is also talking about a specialist in media blows. Political positions impressive streetmarketing campaigns, the firm regularly shines in the media, and noticed way.
This is also the case here to say: each media goes there from its editorial line, Nike offers a balcony and maintains its myth of a brand that needs no one, not even and especially not Amazon. This separation is a manifestation of Nike's flamboyant communication strategy.
The Marketplace pre-empts 49% of the market share of American online Retail: thousands and thousands of resellers sell millions and millions of products. Among them, inevitably, we find Nike products. When you have such a powerful brand with such a wide and deep range, there are hundreds of resellers who will seize the opportunity to be able to sell their products on the majority global trading platform.
At Bizon, it is estimated that this attempt to withdraw is ultimately to try to fight against a tide that Nike cannot control. The most effective way to control your product assortment and pricing policy is to be present directly on Amazon, to benefit from a brand and quality image that resellers cannot necessarily claim to have. What if Nike penalized itself? Hard-core Nike buyers who absolutely want to go through Amazon will potentially do so on non-Prime FBM. As a result, delivery times may be extended and the image of Nike may suffer.
Under the guise of an apparent fight against counterfeiting and the desire to offer a direct privileged relationship to its consumers, it should also be remembered that withdrawing from Amazon is also a way for Nike to more easily control its prices, without having to confront those of resellers on the Marketplace. Another brand ardently affected by the problems of counterfeiting, Apple sells indeed directly on Amazon, preferring to invest the land and offer an official solution rather than letting resellers develop their market there.
Without here praising the apple brand in any way, Bizon believes that this strategy is surely relevant, what is more when Amazon allows brands to remove counterfeit products without warning via its program Project Zero. Behind this story hides a story of prices that probably tipped the scales enormously when making this decision.
Ultimately, the departure of Nike from the platform was a way to generate enthusiasm around it, with resounding success. Nevertheless, it was necessary to put the facts in their proper context: if Nike can launch such a confrontation with Amazon, it is because Nike is Nike. In the meantime, Amazon remains an incredible showcase for brands of a disproportionate ilk, an unequaled development ramp and more than ever a reference tool for the vast majority of consumers, who use it as much for purchasing purposes as of intelligence. Amazon is a store and a media. Nike has its own stores and invests every other media on a daily basis.
According to Bizon experts, it is a safe bet that this media thunderbolt… is only a media thunderbolt, with no real influence on the distribution of Nike products on Amazon. Buyers of Nike products will always find out about these products on Amazon and for the next few years, we will find the range on the Marketplace, probably massively. What will change is who sells it.
Nov 25, 2019
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