When Nike announced in 2017 that it would start selling some footwear to Amazon, it was a deal held up as a sign of the times in the retail industry. The sportswear giant could no longer ignore that the e-commerce giant Amazon had become a major player in sneaker sales and sports apparel.
But two years later, the deal is dead and it’s the ultimate lose-lose-lose situation: for Nike, for Amazon, and for everyone who shops on Amazon, too.
Earlier this week, Nike said it would no longer sell its goods wholesale to Amazon and would end its two-year partnership. It referred to the arrangement as a “pilot” even though that sounds more than a bit ridiculous for a two-year, high-profile relationship.
“As part of Nike’s focus on elevating consumer experiences through more direct, personal relationships, we have made the decision to complete our current pilot with Amazon Retail,” the company said in a statement. “We will continue to invest in strong, distinctive partnerships for Nike with other retailers and platforms to seamlessly serve our consumers globally.”
Over the past few years, Nike has been on a mission to build up what’s known in the industry as its direct-to-consumer business, aiming to sell more of its goods through its own websites and stores while relying less on selling wholesale to retail partners like Foot Locker. This decision fits within that line of thinking.
But Nike had already started down that path when it chose to initiate the Amazon deal in 2017. At the time, Nike executive Heidi O’Neill told me at Recode’s Code Commerce event that the Amazon arrangement “elevated the Amazon experience,” in part by getting Amazon to bar from its marketplace some independent resellers of Nike goods that either didn’t have a relationship with the sportswear giant or were selling fakes.
Over the past two years, though, the Nike shopping experience on Amazon was still mostly a mess, with Nike’s own approved goods — sold directly by Amazon — still appearing alongside inventory from random Amazon sellers in search results.
And the Wall Street Journal reported this week that Nike was “disappointed the deal with Amazon didn’t eliminate counterfeits and give the brand more control over gray-market goods,” which are legitimate items that Amazon sellers buy from distributors or retailers, rather than from Nike itself.
The problem for Nike is, removing itself from the Amazon platform won’t fix that problem. In fact, it’s likely to get worse. Amazon will now look to acquire more “gray market” Nike products to fill in the inventory gaps Nike’s departure will leave behind.
For Amazon, Nike was perhaps its biggest brand-name partner alongside Apple, and definitely the sexiest in the apparel category. It was a name executives would often point to when trying to convince other big names to sell directly to the Seattle tech giant.
“Losing Nike is a huge setback for Amazon that very well may influence other brands — or at minimum, eliminate Amazon’s trophy that it points to when recruiting other brands,” said Larry Pluimer, a former senior manager in Amazon’s outdoor recreation category who now runs Indigitous, a consultancy for brands selling on Amazon.
“This was the JEDI contract of the Amazon retail division,” he added, referring to the $10 billion Pentagon contract that Amazon Web Services recently lost out on to Microsoft.
From a business perspective, the short-term impact on Amazon is likely minimal. But when it comes to the company’s reputation, it could make it harder for it to land more top-flight brands that have enough cachet and direct consumer relationships to afford to say “no” to the e-commerce giant.
Lastly, it’s a bad outcome for you, assuming you are someone who shops on Amazon.
Over the last two years, if you found Nike sneakers or shirts on Amazon and Amazon was the actual seller of the good, you could be relatively confident that it was a legit product from Nike itself.
Now any sense of extra security is gone. Amazon will definitely find ways to fill in the gaps in its product catalog, but if it’s not coming from Nike or someone approved to resell its goods, there will always be question marks about what you are buying.
As a top Amazon executive once told me, “If [a brand’s] got three intermediaries going to some reseller who gets a genuine product — and they’ve got great prices — we want it.”