Nike and Amazon's Breakup
This episode of the Journal is brought to you by nature. Made Nature made helps you live your most vibrant life but a vibrant life requires a restful night and that's why they built sleep by nature made sleep by nature made is smart speaker experience. That helps you quite your mind and gently drift off to sleep with relaxing nature sounds and visualizations to try sleep by nature made just search. The Amazon skill store for sleep by nature. Made for years Nike was one of the best selling brands on Amazon but for Nike that was actually not a good thing because Nike itself wasn't selling selling on Amazon. Even though at that time Nike didn't sell Amazon Nike was still the most purchased apparel brand on this site conditions after covers retail when when we did a search at that time Nike products on Amazon. Turned up seventy three thousand items all those sneakers and all those shorts were being sold by third parties and Nike Really. Wanted to put a stop to that so you can really see at that. Point why they would wanNA clamp down on that because if you can easily go and purchase an item aggie item on Amazon and so many people have Amazon dot com on their phones. What's your incentive at that point to go and download the Nike App and just be curious enough to find the item thirty seventy three thousand available on Amazon? Then in twenty seventeen Nike thought. It had found a possible solution. But that's solution. Came with the catch today on the show. The deal that Nike struck with Amazon. In why only two years later Nike. It's walking away. Welcome to the Journal. Our show about money business empower. I'm Ryan Knutson. It's Friday November fifteenth. Most most of the Nike products sold on Amazon aren't fakes. They're real nike products. It's just Nike. Doesn't have control over them. When if Nike is biggest concerns concerns was this whole gray market of products that are sold on Amazon by that I mean random people going out and buying legitimate nike products and selling I'm on the platforms and they could have bought them from an off? Price chain sale from Nike and then go sell it on Amazon. Why is it such a bad thing for Nike that there are these gray market sellers on Amazon because they don't have control of the brand in the way that it's shown they want to be the seller of Nike products? They they want to dictate what shoes are available. Essentially what prices. And if they're all these third party vendors that are buying shoes and selling them then it's sort have it messes up with Nike's strategy in terms of how they interact with consumers. Is that kind of. That's true and also it kind of floods the market. So there's all these thousands of Nike products available on Amazon. There's less incentive for somebody to go to a store and purchase Nike or go to Nike Store and purchase Nike. You WanNA maintain some level of exclusivity inclusivity for your brand that. You're dictating the terms in which those products are being sold. Nike's lack of control over how these third parties is priced and sold Nike gear on Amazon posed. A business risk. It wasn't illegal but it wasn't how Nike would prefer to have it's good sold. That was is made even worse by another problem. That Nike had with Amazon counterfeits were popping up on the site and that could further undermine the brand then in twenty any seventeen Amazon and Nike hatched a possible solution for years before this Amazon had been trying to win over Nike. Aki Amazon's courtship of Nike dated back several years. The company had flown to its headquarters in Beaverton Oregon several times at one of the meetings. Jeff Wilkie flew there himself and he's a Jeff bezos. Deputy Severi top senior Amazon executive going to Oregon to do Nike. Would you send a top up executives. That's usually a signal that you really want to create a strong partnership Amazon. One of the credibility of big brands selling directly on its is platform but Nike had consistently refused. Nike is already one of the biggest apparel companies in the world and they're distributed in lots of stores including including their own so finding new customers wasn't much of a draw and Nike was reluctant to join Amazon to begin with because it had problems with the away. It's brand would be presented on the site. The thing that really gives a lot of brands pause is the fact. That Amazon is kind of the everything store. It's like where you buy toilet paper and really cheap items and so they don't want to be seen in that environment. Where every product you just flip through and two shirts hurts our next to each other? If Nike joined Amazon it wouldn't just be losing control of the brand rand presentation. It also be losing control of the customer. So Nike doesn't want to sell you a sneaker. It wants you to sell you. Everything like a sturt a bag to go with at some pants if they can bring you into their store and into their experience they can get you to buy a second item or third item whereas if you go and buy on Amazon you buy your sneaker and then you turn around and you look at the next branch could be a competitor Nike. They don't get to keep the customer the same way that they can win. They're using the sneakers APP or their own Nike Anky shopping APP. All of these factors lead Nike to resist Amazon's overtures to join but when Nike and Amazon were talking in twenty seventeen Amazon offered offered something to try and get Nike on board. It had to do with that gray market Amazon did was they used that as a bargaining chip If you come on our platform crackdown on these random people. That are selling your products. You'll have so much more control. You create a brand page and let's do a test. And why wasn't this something. That Amazon was willing to clamp down on without Nike joining. The platform itself Amazon wants as many sellers as possible to join the platform. They want people to be buying goods and selling them and it's very easy to sign up for an Amazon account and become an Amazon seller for Amazon Getting Nike itself on board could compensate forgetting those third parties off the side and so they started negotiating over a plan. If Nike officially joined Amazon the Journal reported at the time Amazon would block third parties from selling the same items that Nike whistling. And it would do that. By tracking the unique item number that every product has then. Something happened the gave the negotiation some urgency in good morning topping America's money trouble for major retailers points authorities filed for bankruptcy and announced plans to close or sell about one hundred and forty of its stores. That's nearly nearly one third of its location. Sports Authority was one of the biggest sellers of Nike products and when it went into bankruptcy it had an estimated. Four hundred million dollars is worth of Nike inventory. All of it was sold off at rock bottom prices. This was great news for some of those third party sellers. Suddenly they could buy. I A bunch of cheap Nike Merchandise and put it on Amazon but it was bad news for Nike. Not only were there more products outside. Its control it but it also just lost one of its biggest distributors under this new pressure in twenty seventeen Nike accepted. Amazon's offer at the time Nike. He said it was quote looking to improve Nike consumer experience on Amazon. But it didn't work out exactly as planned bats after the break. This episode of the Journal is brought to you by nature. Made Nature. Made won't rest until you're sleeping. Well that's why nature made built the sleep deep by nature made smart speaker experience. Sleep by nature made helps you quiet your mind and gently drift off to sleep with nature. Sounds and visualizations wants to try. It searched the Amazon skill store for sleep by nature made ditch the endless growing on your phone for a better falling asleep experience. Let yourself glide into sleep to the sound of the bubbling creek or focus. Your mind on rest with a guided. Visualization of a peaceful beachside sunset with sleep by nature made nature made supports. A good night's sleep with sleep by nature made and with its one hundred percent. drugfree Melatonin Gumy's to. He tries sleep by nature made just search. The Amazon skill store for sleep by nature. Made does Welcome back. We're right when Nike Amazon Struck. That Adeel people who sold Nike gear on Amazon started getting emails from Amazon. Telling them that soon that have to stop selling some of their Nike products. A Nike started putting items on Amazon page. Amazon engage Nike brand page. It's a similar brand page to some of the other like J. crew has its own brand page. Nike actually only sold very few items on the platform and they were basic items. So you weren't getting Jordan's on Amazon was on being sold from Nike. You were getting stocks and basic sneakers. And they were saving all their best for their sneakers APP and for their stores not for Amazon. A lot of brand Iran partnerships. Start out this way with a smaller selection of cheaper items and the idea that over time. The brand will keep expanding but Nike's still had the same brandon concerns about Amazon that it had always had and so it didn't keep expanding. I think Nike decided that it was is going to maintain its brand image. Offer the Jordan's and the premium items on Amazon for them offering a few items basic items in order to crack down on the market. That was seemed like a smart idea at the time so they didn't really go all in here. No they didn't really commit Tam's on he was kind of like they dipped their airtel in a little. Bit Yeah on think of that fact that they weren't going on in the way that Amazon probably hoped they would so sources have told us that there was constant negotiations between the two companies and obviously Amazon wanted Nike to be selling more products on the platform and Nike was resisting. And then the other thing that we've I've heard from people that we've been speaking to is that Nike executives really felt that Amazon didn't deliver on the cracking down of third party. Cellars Nike items. are still widely available on Amazon. If Nike wasn't going to go all in the Amazon had had a problem. It would be kicking off Nike products sold by third parties without any items to replace them and remember. These products are huge sellers on the site Amazon. Got Rid of them. It'd be kicking off some of its most popular items and Amazon. Didn't feel like those third party retailers. Were really doing anything wrong. As for the third party sales those are like Amazon legitimate sales. And they're making it better for the consumer because because those items wouldn't be available otherwise so they haven't really cracked down on those types of items extent. That brands want them to so Amazon. is is willing to try to help crack down on counterfeit products. But if you're just another business selling Nike products they're not going to step in the way of that because because that's just another story that that could be any other retailer themselves on their platform especially if Nike isn't selling that particular item if they cracked down on the sale of that item is just not available at all on Amazon Counterfeits were also still a problem. Though Amazon said it prohibits the sale of counterfeit and gives brands tools to take them down. But this situation where Nike wasn't going all in third parties sales persisted on Amazon led to a total breakdown and this week after through two years of testing things out with Amazon Nike announced that it would not renew its agreement to sell goods directly on the site. Nike said in a statement that I wanted to focus more on direct customer relationships via its APP and its own retail stores. It's also harring back. On the number of retailers it uses across Austin Board Amazon issued a statement to it said that it has lots of partners and that it agrees with its partners more than it disagrees with them it also also said that when it negotiates with brands it's doing so on behalf of customers to get the biggest selection in the best prices Nike's trying to play down by saying it was a pilot. Amazon is trying to play it down by saying that this is a normal course of business. This doesn't us like having a problem with most of the brands we saw. We agree with most those people and that this is common business practice but at the end of the day. It is a big deal because Nike being one of the biggest clothing brands out there an on Amazon being the biggest ECOMMERCE company. I mean how these companies interact with each other sets precedence for how the rest of the economy starts to kind a fit in around these two big players particularly Amazon and I think it really says something just about the state of shopping and retail and that one of the most widely available brands on Amazon is potentially going to be a brand. That doesn't sell Amazon. The biggest store. So what does that tell you you. Though largely about the relationship between Amazon and brands it said a fraught relationship. Dander stand that this is a massive online retailer and the force to be reckoned with in company. That's going to be around for a while. But they don't like it and they don't like some aspects of it and a lot of the control that they had pricing control distribution control that's slowly eroding. An Amazon has contributed community. That Nike's decision to leave Amazon is unusual but it's not entirely unique in two thousand sixteen birkenstock decided to leave Amazon too. For the same reason. Birkenstock was fed up with all the third party sales but there are still berkinstocks on Amazon. And and after Nike's gone there will still be nikes and those brands will probably be fine without Amazon. I guess it's great if you're one of those brands that can ford to survive outside of Amazon's Paul but for all the other brands that don't have the same weight in pole with consumers as Nike. What does does the future hold for them? Some brand found that selling on Amazon is beneficial to them that they're reaching a different kind of consumer and they've managed to curate a set of have products that they feel are better suited to the Amazon customers. If something that's like more basics and that will allow them to reach a customer that wouldn't normally go into their stores or so they can introduce their brand to that type of person but then other brands. It's kind of like a move of desperation. They are really looking for other distribution abuse channels and this is what they're doing to survive Amazon has done is. It's made the seller irrelevant when you're on Amazon. That's not the number one thing that consumers are looking for like who is failing me. This shirt it says Nike on it and they look at the price. I don't know if the average customer if you were to walk down questions on the street whether they know that Nike selling on Amazon or not because for their purposes. They're searching Nike shirts. And they're coming coming up and they can buy them. Aw and that's all for today. Friday November fifteenth special. Thanks to Laura Stevens and Sarah Germano for their reporting on the story. The Journal is a CO production of Gimblett and the Wall Street Journal. Your hosts are me Ryan. Knutson and Kate Linebaugh Kate we hope you feel better soon. Were produced by any MUNAF Ricky Novitsky Sarah Platinum Willa Ruben. Our senior producer is PIA guide. Cari any row strasser here is our supervising producer. Griffin Tanner Engineer. Our executive producer is Gerard Call Mixing. This week is by Sam Bear and Peter Leonard. Our theme music is by Haley Shah additional music. This week comes from blue dot sessions and from Billy Libby Peter Leonard Bobby Lord and Haley. Shaw if you like the show so follow us on spotify or wherever you listen. We'll see a Monday afternoon. Thanks for listening.