Amazon seems to be on fire these days, entering into numerous deals and prosperous wagers ever since its $3.7 billion Whole Foods Acquisition.
The latest name to join Amazon is Nike, which has entered into a partnership to sell its shoes directly via a brand-registry program structured to keep counterfeit goods off the site.
The deal allows Nike Inc. to exert more control over its product distribution, warranting that knockoff shoes aren't offered by third parties on the e-commerce marketplace. While the arrangement isn't yet fully public, it makes complete sense for Nike to want to enter into this deal, as shoes are popular products for counterfeiters and Nike's global brand is a particularly attractive target. It therefore has pressure to police online sales more aggressively and amplify revenue as experts estimate that this could result in $300-500 million in additional revenues.
The partnership will also allow Nike to control more efficiently how its products are displayed and sold on Amazon's platform. The sportswear company has a grand goal of reaching $50 billion in revenues by 2020 and its e-commerce channel is likely to be a chief factor contributing towards this goal.
This is not a one sided deal, however: Amazon too benefits greatly from the alliance, as with the risk of buying counterfeit good from third party sellers on the site, many people, particularly millennials, have probably refrained from buying Nike goods on Amazon. Without this risk, revenues from these hesitant consumers should stream right in, which is mutually beneficial for both companies. That data, compiled by research firm Slice Intelligence, is sure to exponentially rise when popular styles, like Nike's Air Force 1s and Converse's Chuck Taylors, are available via Amazon Prime.
That being said, Amazon and Nike's union could cause immense damage to brick-and-mortar retailers. The retail industry has anyway been suffering as of late and thousands are at risk of losing their jobs. It's also improbable that third-party sellers will survive if Nike accepts the Amazon deal. Customers would much rather buy directly from Nike than a seller offering potential knock-offs.
Moreover, If Nike strikes a deal with Amazon, it implies that J.C. Penney and Kohl's will no longer offer the line. Other retailers that offer Nike merchandise include Dick's Sporting Goods and Foot Locker. While Amazon has a deal with Under Armour, their merchandise is still offered at Dick's Sporting Goods. Foot Locker won't be able to compete since it's already struggling. Thus, forming a deal with Amazon involves the opportunity cost of severing critical ties with many of Nike's traditional partners.
The prospect of a unique and exclusive relationship between the two giants caused shoe-retailer stocks to plunge. Foot Locker Inc.
While the deal has not been solidified, it remains apparent that its approval would have major repercussions for both the retail world and the two companies involved. Again, it boils down to the complicated tradeoff between company benefit and industry decline.
- https://www.forbes.com/sites/greatspeculations/2017/06/23/a-closer-look-at-the-amazon-nike-partnership/#60ed5abcf795
- https://www.bloomberg.com/news/articles/2017-06-21/amazon-said-to-sell-nike-shoes-directly-through-brand-registry
- http://www.refinery29.com/2017/06/160388/amazon-nike-partnership-rumor
- http://www.inquisitr.com/4317577/amazon-could-buy-out-nike-why-this-is-bad-news-for-retailers/
