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We Evaluate Nike’s Break-Up With Amazon

6 Jan 2020

As widely reported this past week, Nike announced that it intends to stop selling to Amazon after piloting a Vendor partnership since 2017 ‘..to focus on elevating consumer experiences through more direct, personal relationships’. Given that Nike retails through a network of thousands of stores and channels and so will never fully own each customer experience it’s an intriguing situation and one that asks whether other brands may take Nike’s lead in retracting from online marketplaces. But, what do brands need to consider and could Nike have decided on an alternative approach?

Consumer demand and being discoverable

Amazon retail services a fraction of global locales that Nike sells in but is reportedly visited more than six times per month by more than 300 million consumers in affluent countries and enables over $230B of retail transactions annually. Amazon is also now the first destination for product search and discovery for consumers in the US and UK while search share continues to grow at pace in other locales. Considering the millions of shoppers that enter the web via Amazon every day and the tens of millions of product searches used, ‘Nike’ has been in the top 0.02% of all Amazon.com searches in 2019. That’s an incredible amount of traffic and consumer purchase intent to turn your back on.

Nike may assume that if consumers are unable to purchase via Amazon they will simply revert to Nike.com where they can control the shopper experience, but consumer shopping habits may not fully support this. In October, Primark released to press in the UK that its products are not directly for sale via Amazon. Immediately, top trending search terms on Amazon UK contained ‘Primark’ in phrases for women’s and men’s clothing.

Upcoming and successful DTC brands such as GymShark who may be resisting the temptation to sell to Amazon retail have to consider the balance of selling direct with effectively not fulfilling some customer demand. A high number of shoppers regularly search for GymShark on Amazon, with branded search terms being in the top 8% of all searches in the past six months. However, given familiarity and loyalty to Amazon convenience, in particular the ever-growing Prime audience, data shows that a high percentage of shoppers then go on to convert purchases on Amazon with available competitor or alternative products and are therefore missed opportunities for brands such as GymShark.

Brand equity and control

Due to scale and complexity, brands can find it challenging working with Amazon and the e-commerce giant is notoriously uncompromising. Algorithms and automated processes to manage a reported 2 million sellers can sometimes penalize reputable brands and retailers resulting in lost earnings while nefarious sellers go undetected. It’s a problem so complex that Amazon is unlikely solve for completely even with the assets it has at its disposal. The problem for Nike, and in turn customers of Nike as well as Amazon, is that shoppers will continue to search for Nike apparel on Amazon and while Nike no longer controls its branded search terms and related shopper experience someone else will.

Currently, a search for ‘Nike’ returns genuine Nike goods sold by Nike but in future shoppers will be offered products that best fill the void with Nike having no control over listing content or product quality. It seems the only outcome of this scenario is a loss for the consumer, Amazon and Nike. The cost of targeting Nike branded search terms for Adidas and other competitors however is likely to be far more effective.

Amazon more than a retailer

Nike may be an anomaly being a super-brand. For other brands, Amazon is a route to customers that just can’t be ignored and should be viewed as an opportunity that is more than a retailer. Amazon vehemently protects customer data, and rightly so, but brands can generate incredible insights via the sheer scale of Amazon to support initiatives such as product development, understanding customer intent, planning for seasonal buying patterns, comparing shopper location-based habits. Measuring effectiveness of off-Amazon marketing and social media on Amazon retail sales is also a powerful and real-time indicator of success. If you include Alexa, Internet of Things, Prime Video, Fire devices, Amazon Pay etc.

Amazon is an ecosystem that has incredible scale and potential even for super-brands such as Nike. Perhaps like many divorces there is no winner in Nike’s decision to break up with Amazon retail but for any brand struggling with navigating Amazon, employing the right strategy across the most relevant product-set can have incredible returns that go beyond retail sales.

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