Nike walks its own path

Nike
made an important decision this month about its future relationship with online
retailer Amazon. After a two-year test program, Nike has decided it will no
longer sell directly to Amazon. Now, why would any major apparel brand want to
break ties with Amazon? It is the leading online retailer in the United States?
Though this may seem like an unusual development, it was not totally
unexpected. Nike initially made some significant demands of Amazon, including
offering the platform a limited amount of products and making demands on how
the goods were presented and priced. Nike dictating to Amazon how it sells its
goods? It may sound crazy, but Nike did just do it.

Nike
inhabits a very unique position in the retail environment. It’s one of the most
recognized brands in the world, and they do not need to rely on a single
retailer for generating sales. They can and do dictate just what and how their
brand is sold, and they are in a position to walk away from any major retailer.
Just how big of a hit to Nike’s bottom line this decision will be, no one can
say at this point. What is certain is that the company plans to make up the
loss in revenue by increasing direct to consumer sales. Nike feels that it can
generate more profits and higher brand loyalty when a consumer purchases
directly from Nike rather than via a third party. It all boils down to
controlling the perception of the brand, and Nike knows a heck of a lot about
building brand loyalty.

Who
stands to gain in this situation? Nike obviously thinks is will, but also
independent retailers stand to gain. With Nike cutting off the flow of goods to
Amazon, this leaves a fairly significant gap in the marketplace at Amazon.
Consumers may decide to still do their shopping on Amazon for their Nike needs
and shop instead with third-party sellers. This means increased sales for Nike
products with the possibility of better margins with less competition.

It’s a
significant risk for any brand to divorce themselves from a major retailer like
Amazon, but if anyone can do it successfully, its Nike.

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