Nike, Amazon, Omar Saad discussed on The Indicator from Planet Money


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He is actually tracked the retail market for almost two decades. It's and he had actually a lot of things to say. The ultimate point here is that Nike believes Amazon. Needs it more than it needs Amazon. And that's why they're doing this. Omar more Saad says that Nike decided to pull out of Amazon for at least three reasons. The first reason is that over the past few years Nike started to aggressively market it directly to its customers because it wanted to be in charge of how customers experienced the Nike brand an Amazon. Just kind of fits less and less into that strategy edgy. Second reason we know everything about data and in Nike's is Amazon. Didn't share of the customer data. Nike would've liked to get from this partnership and he comes. The third reason Nike was upset. That Amazon didn't do enough to police the gray market in the sale of fakes on their platform. The Long Story Short I don't think Nike believed that Amazon. Mazang delivered the experience. They want for their consumers There was too much gray INAUTHENTIC and authorized product being sold through Amazon marketplace. You know I once bought this. You know what I thought was going to be this amazing golf bag Yeah it was a callaway golf bag which is a great brand and When I put my golf clubs in the bag the way the legs replaced it tipped over it? Couldn't stand up straight with the golf clubs in it was clearly a fake give thankfully Amazon took it back but those are the kinds of consumer experiences that people have when it's just kind of this open market wild west Cowboy for marketplace. Now some of these third party sellers on Amazon are selling fakes but a lot of them are selling genuine Nike Nike products. And they buy these products from a wholesaler and then they're expected to sell those goods those Nike goods to people only in their local areas out of their stores. But instead sometimes these sellers don't stick to that and they might go online and sell those goods anywhere and everywhere. What they've been doing is kind of on the sly fly? Changing their name and selling Amazon's third party website at a discount. That's where this grey market is coming from. It's actually Nike's own existing customers so he'll imagine Jin. That Nike was hoping Amazon. Would police these third party sellers right. Yes when Nike started selling directly Amazon they obviously had hoped that Amazon Amazon would start policing these third party sellers and also would police the fake products on their platforms. Okay and did they do enough of that. It doesn't look like they did enough so Nike's he's pretty unhappy about this and actually if you look on Amazon right now you still see that. There was a ton of Nike products. Even after Nike has pulled out of Amazon so I talked talked to Omar about it and he showed me how big this problem is. Oh that's pretty crazy. He'll look at this shoe. So this this pegase Shoe Nike Zoom Pegasus. Thirty five running shoe. The price is eighty three ninety nine ranging to two hundred eighty one twenty-one so and you really have to pick your color and your size there could be dozens dozens if not hundreds of different sellers just for one Nike Air Zoom Pegasus thirty-five running shoe. So he'll get kind of. Sounds like you know more. We're getting a little frustrated looking for that. Pegasus running shoe absolutely looking through all the shoes the different sizes it was a frustrating experience. And I think that a lot of other customers have that same experience with Nike is a brand that wants to protect how it's perceived and how the consumer experience perceives it especially in these new digital realm so to speak and today today Nike's business is all about that kind of consumer interaction about thirty percent of Nike sales volume is directly to consumers in that sector has been growing year a year after year. They're selling direct to the consumer and they're having that direct relationship for the consumer hit and they also get the customer's data. This is a total change from Nike's traditional way of doing doing business for example here's Omar Saad describing. How Nike did business like twenty years ago? It's a fascinating discussion. Because when Nike was ninety five percent wholesale their business model was you know. Do some high level brand marketings run a campaign like just do it and billboards and some TV spots And then you wait for the phone to ring. And it's one the retailers like footlocker. Dick Sporting goes. Let's have twenty thousand yellow ones in ten thousand white ones and you know. Nike dials. Up At supply chain in Asia. And you know six months later. The shoes are are being delivered to the retailers in Nike's wiping his hands and the and the retailers of the ones that are owning that consumer interaction but now things are different today. Nike wants wants to know who is the customer. Maggie knows who I am old. I am kind of income core tile. I'm in who my kids are. What sports they play? You know they can see you know through through the APP. What different kind of content interview we interact with and engage with Nike knows who you are and based on that knowledge the company will try to sell you more than the sneakers? You came to the APP for it can do this wherever you're shopping on. Nike's APP and one of their stores via Social Media Nike wants customers to emotionally nationally. Connect to its brand. which hopefully will motivate them to obviously by its products and ideally directly from Nike and not through a third party seller or the Amazon but it does raise the question? What about the convenience that shoppers love when they do go to Amazon being? What Nike's doing that? As well Nike he has two day shipping and next day shipping now but the company also offers pick up in store. So you can swing by on your way home from work and avoid the return hassle. This is one of the clear advantages into just traditional retailers. Have they already have stores near where people live. Nike has caught up in other ways as well. The company now puts tracking tags on most of its products products and it knows where every single item is at any given time and the tracking is not limited to one location Nike contract inventory across the physical stores and warehouses houses and the whole network serves basically as a gigantic distribution center. This means if you order a shoe Nike can send it to you from their own warehouse or any physical Nike store. Or whether it's in Los Angeles or in New York you're seeing retailer is finally starting to figure out how to use their store networks as a competitive advantage and everyone thought thought that the these digital disruptors we're GONNA send retail into permanent tailspin and there has been massive disruption. Let's be clear I mean the business model has changed the inventory model. How consumers shop and it's taken several years for these companies to adapt but to me it's clear they're adapting? He'll get this kind of does raise the question. Though of whether or not other the companies will also try to pull out Amazon or whether it's just a nike specific thing. I know I know well. It's hard to say because the truth is baked brands. They can probably pull it off like Nike. You have a strong connection. Direct connection to the consumer small brands. And they're gonNA pull it off. Probably not even those companies that can connects that well with consumers. Some of them may not want a lot of Amazon area. Love it Thanks so much for bringing a story. Thank you so much for having me. Today's episode indicator was produced by Jared Marcel. Fact Checker is Nadia Lewis. Our Editors Patty hearst indicator is a production of N._p._R...

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