The Forced Conversion of Nike to Amazon

The American sports equipment manufacturer is counting on increasingly intermediate distributors.

In addition to Amazon, he will sell his products on Instagram.

This is only a first step, but it marks the end of the resistance of one of the last strongholds of opposition to Amazon. Nike, the world’s number one sporting goods company, announced last week the signing of an agreement with the e-commerce giant, after refusing for years to put its products on the platform. ‘We’re going to sell a limited number of products on Amazon,’ said Nike CEO Mark Parker at the annual results release. This will be a ‘pilot experiment’, which will test the sale of a limited range of shoes, clothing and accessories, before eventually extending the offer.

 

At the same time, the group announced a partnership with Instagram to sell shoes via the social network. It will join the few sorted trademarks authorized to use the platform (owned by Facebook) as an extension of their online store.

 

These two agreements are an acceleration of Nike’s direct sales strategy, which involves increasing the number of intermediaries, including sports store chains. In recent years, leaders have focused on expanding Nike’s network of stores (close to 1,000 worldwide) and its own eco-commerce ecosystem Nike +. With a target of reaching $ 50 billion (€ 43.8 billion) in sales in 2020, direct sales, which have grown by 16% in one year, should account for one-third of revenues, compared with 17 % In 2012. Nike recently announced the cancellation of 1,400 jobs, or 2% of its workforce, in order to reorganize its business strategy. Nike has reported a record annual revenue of $ 34.3 billion for its 2016-2017 fiscal year (+ 6% ). Its net profit jumped 12.8% to 4.2 billion.

 

Did the Oregon giant need to give in to the sirens of Amazon? For years, apart from a partnership with its subsidiary Zappos and an inconclusive experience with its bracelet connected Fuel Brand, Nike did not want to answer the calls of the foot of the giant e-commerce, on which its rivals are already present .

 

But, in reality, his products were already available on the platform … except they were not sold by him. His shoes and other T-shirts were distributed by third-party vendors, sometimes without proper authorization. According to Morgan Stanley, the ‘Swoosh’ (comma) is even the best-selling brand on what has become one of the Millennials’ favorite shopping sites. Especially in the United States, where, according to the NPD Institute, one in four sports shoes is sold online.

 

Resume control

Instagram, for its part, already appears as a place of reference for sneakers, not only for its influence on fashions, but also because there developed an informal economy of reselling shoes. Now Nike has 73 million followers …

With Amazon, and to a lesser extent with Instagram, the group wants to regain control of this windfall that escapes it, in a context where chains of sports stores are slipping across the Atlantic (read below). ‘Nike is defining what it is possible to do in the distribution,’ said Parker. But to associate with the Seattle ogre, which displays great ambitions in fashion, can also prove to be double edged (see opposite). By becoming an official partner, Nike will be able to better control the products put forward on Amazon. The group also negotiated better control of the site on counterfeits and sales by unauthorized distributors. But Amazon mechanics generally gives primacy to price, where the brand bases its strategy on carefully crafted marketing plans. Goldman Sachs, however, believes that this will ‘give Nike a direct economic exposure to a large distribution network that is growing rapidly.’ Drucker Mann, a bank analyst cited by Bloomberg, estimates that Nike’s turnover could grow by 1% over time if the deal is extended.

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