Why Did Nike, Who Broke Up With Amazon, Get On With Tmall?

The underlying logic difference between Chinese and American electricity providers has resulted in a completely different relationship between the two brands.
According to fashion business news, US sports giant Nike Nike announced recently that following the announcement of the CEO Mark Parker stepping down, Nike decided not to sell sporting shoes and clothing directly on Amazon's platform on the eve of the Christmas holiday season, ending the pilot project with Amazon, but its application and website will continue to use Amazon's cloud service. The news came out and sparked an uproar in the industry.
Nike said the move is aimed at further narrowing the relationship between the brand and consumers so as to better enhance the consumer experience. In the future, the group will sell mainly through its own direct retail network and other exclusive partners.
Nike formally entered the Amazon platform in June 2017 to better handle the brand's slow-moving inventory and discount products, which is a key step for the brand to cooperate with 30 thousand retailers worldwide. Analysts at Goldman Sachs predicted that Nike's annual sales would increase by 300 million to 500 million dollars after its direct sale on Amazon. Now, it seems that this two-year cooperation has not brought significant results to Nike.
It is noteworthy that, just before Nike announced that it would no longer sell products directly on Amazon, Nike scored a noticeable success in Alibaba's Tmall eleven, with a brand break of 1 yuan and 45 seconds, 1 hours and 29 minutes, breaking the 1 billion yuan mark. As early as 2017, double eleven, Nike was the first Tmall to break 1 billion of the history of clothing business, leading sports consumption category, last year, the brand also broke 1 billion before noon 12.
Nike's targeted strategy is not only the embodiment of the brand in the key adjustment period, but also reflects the differences between Chinese and American electricity giants.
The first is the difference between China and the US market. As one of the most famous brands in the United States, Nike has achieved high market penetration both online and offline. The Chinese market, especially the online market, is still expanding rapidly, and has become an important driving force for Nike's growth.
In the three months ended August 31st, the total revenue of Nike group increased by 7% to $10 billion 600 million over the same period, exceeding analysts' expectations. Net profit rose 24% to 1 billion 360 million dollars, gross profit margin reached 45.7%, and operating expenses increased 10% to 2 billion 300 million dollars, mainly due to the group's continuous investment in the transformation plan.
Among them, North America as Nike's base camp, revenue grew 3.6% over the same period, relatively stable. The Greater China region recorded double-digit gains in twenty-first consecutive quarters, up 22% to 1 billion 680 million US dollars compared to the same period last year. The largest share was footwear business, which grew 27% to 1 billion 200 million US dollars over the same period last year.
Before Nike entered Amazon in 2017, American consumers were already familiar with Nike and had a large number of purchasing channels, including the third party distributors on Amazon. In this sense, the impact of Amazon's entry on Nike's sales is not large. Amazon's advantage in logistics delivery is not enough to become the main attraction. For the current Nike, what is more important is the digitization ability of the internalization group. It is the primary task to concentrate on upgrading the official website and self APP strength.
In October this year, Nike announced that its current CEO Mark Parker was stepping down in advance. Its CEO and CEO position will be replaced by John J.Donahoe, a member of the board of directors. The appointment will take effect next January 13th, and Mark Parker will continue to serve as the executive chairman of the group. John J.Donahoe used to be the CEO of eBay and chairman of PayPal's board of directors. This appointment is considered to be the symbol of Nike's strategic layout focus on the digital field.
Some analysts believe that the addition of John J.Donahoe may lead Nike to a bigger breakthrough. According to Andy Campion, chief financial officer of Nike, Nike has established a new long-term development model to transform into a digitally led group and establish more direct links with global consumers.
Tmall is different from Amazon. China has a large number of sinking markets to be discovered. The real situation may be that in addition to the development of overseas areas, there may be a large number of consumers do not know that Nike, or even lack of access to genuine Nike, the Tmall endorsement of the genuine flagship store can obviously bring incremental to the brand.
In fact, as early as Nike released the 2018 fiscal year fourth quarter earnings conference, the 80 minute earnings conference mentioned 7 Tmall. At that time, Nike had attributed the excellent results of the Chinese market to the cooperation with Tmall. Mark Parker points out that the focus of Nike group is to launch new products, push retail outlets and business. The cooperation with Tmall is the main component of the electricity supplier business.
Second, Alibaba and Amazon have been seen as enemies of physical retailing, but the two have been very different in strategy in recent years. Amazon and Alibaba play a different role in brand building. Amazon is still a channel so far, and Alibaba has positioned itself as a platform for brand building outside the channel. Amazon's current marketing activities are mainly Prime Day and black five discount and other traditional promotional festivals.
Amazon's preferential policies and algorithm tilt seems to be very limited for the official brand of official shops. When consumers search Nike, Amazon does not put the brand official shop entrance as the Tmall brand flagship store at the top of the attention. Instead, it combines the official store products with the third party dealer products. Because Nike stores are newer and less commentary, Amazon's algorithm even puts official store products at the bottom of the page.
Amazon is more like a traffic aggregator, and it does not build its own brand community. According to the monitoring data of Gartner L2, 96% of the sportswear brands contain video on Tmall, and 65% of the brands contain star marketing content. 83% of the sports apparel brands that track and monitor are equipped with brand areas at the top of the search results, so that the marketing information is always in the center to achieve the goal of crowding out the third party sellers.
In addition, the Alibaba's 618, double eleven and two dozen will release the pressure of sales promotion at the end of the year and the end of the year. In addition, marketing IP, such as Tmall super brand day, provides an exclusive promotion session for brands, helping brands start their new products on the brand day or discount products.
Taobao and Tmall have also developed a set of marketing tools for brands. For example, click through payment, marketing tool for sellers to achieve accurate product promotion, such as Taobao express. In addition, Alibaba has made a lot of efforts in content marketing. Taobao's live broadcast, Taobao headlines, micro panning, good products and other promotional channels of Taobao, as well as Taobao's live broadcast and other new media promotions, are making Alibaba develop towards social ecology.
Alibaba has set up Taobao and Tmall platforms, and has set up a luxury brand Luxury Pavilion on Tmall platform. Such a Pyramid structure conforms to the needs of different types of brand building. In view of the problem of counterfeit brand, the similar layered Amazon has not made effective progress in counterfeit goods. While Alibaba's Taobao platform has been criticized, Tmall platform provides genuine quality assurance and data analysis feedback, and can attract brands to enter. Especially for brands that have not yet officially entered the Chinese market, Tmall platform has become an important springboard.
This series of marketing tools and activities will undoubtedly increase the brand budget burden and operation pressure, making many brand electric business departments and operators feel physically and mentally exhausted. But for those brands who want to speed up their visibility with the help of traffic and boost sales and exposure, Alibaba still provides more abundant solutions and marketing opportunities, and can enhance sales volume and brand building in two aspects.
The distribution of interests between private brand and brand name is the third important reason that affects the relationship between platform and brand. Amazon has been betting on its own brand strategy in recent years. With the expansion of Amazon's fashion layout, revenue from the business is expected to double to $85 billion next year. Alibaba did not develop any private brand, but only indirectly supported Amoy brands through cooperation with net red. This also determines that Amazon must tilt its way forward between its own brand and its brand.
According to earlier reports of the Wall Street journal, Amazon optimized its search system by optimizing its algorithm at the end of last year, and the top of the search results will give priority to Amazon's own brand products rather than "the most relevant products" with user input results. Amazon can control the manufacture and distribution of self manufactured goods and reduce the cost of intermediaries and marketing, so Amazon's retail team hopes to highlight its own brand products in search results to enhance the profitability of e-commerce business, which has triggered differences between Amazon Co's internal search teams and retail teams, according to people familiar with the matter.
This is why the market often sees Amazon as a threat to the clothing market rather than a partner.
Amazon has successfully defeated WAL-MART, becoming the most popular clothing retailer for American consumers, according to the latest survey released by Coresight Research. The report shows that of the 1732 American adults surveyed, 65% of respondents bought clothing or footwear products on Amazon's website. Clothing surpassed books, cosmetics and electronic products and became the most popular product of Amazon's website.
The findings are clearly bad news for clothing retailers. 21.5% of the respondents said they would choose Amazon self clothing brand products, and their self clothing brands sold only after Nike, Under Armour and Adidas in the whole shoe category. In addition, about 19% of respondents said they plan to transfer some or all of their clothing expenses from T.J. Maxx and Marshalls to Amazon this year, up from 16.6% last year.
In fact, Bloomberg quoted people familiar with the matter as saying in 2017 that Amazon is cooperating with some large sportswear suppliers in order to develop its own brand of sportswear, and believes that this will lead to new waves in the already noisy sports industry, bringing the world's biggest sports brands to new competition. On the day of the news, lululemon shares fell 4.9%, Under Armour also fell 2.8%, and Nike shares also fell.
In September this year, the news was finally confirmed. After setting foot in women's clothing, underwear and beauty make-up, Amazon signed an agreement with Puma, the German sports brand, to launch a sports apparel brand Care Of, which has 50 products, including sports shoes, Bottomwear, T-shirts and accessories, etc., and is made from pilling resistant and anti sweat fabrics. The series products are on sale on Amazon platform in September 23rd.
For its Puma in Europe, its appeal is different from Nike, which has reached a high penetration rate. If you want to compete for a bigger share in the sportswear field in the United States, it will be a new opportunity for you to compete with Amazon on the strength of your own strengths and Amazon. Since last year's departure from Gucci's parent company's Open Cloud group, Puma's performance has continued to grow rapidly, and gradually shifted its strategic focus to the North American market. At the end of August, it opened its first flagship store in Fifth Avenue, New York, and formally joined Adidas, lululemon and Under Armour in the fierce competition with Nike.
Obviously, Amazon is already a wall that hopes to expand the market share of brand expansion, but Nike, a more powerful brand, always wants to be a strategic priority for the platform. What's more, it is hard for Nike to not be amazed at Amazon's desire to divide its sports market share with its own brand.
Jefferies analyst Randy Konik said that famous brands do not need Amazon. Amazon has an advantage in delivery speed, but this advantage is no longer obvious. Famous brands have realized that importing traffic into their websites is more profitable and can enhance their brand strength, while the incremental revenue from Amazon website traffic is lower, and the promotion of brand is also less. Many powerful clothing brands will try to avoid or weaken their dependence on Amazon in the future.
In addition to the above, Amazon and Alibaba's online retail strategy also varies. Amazon launched an unmanned convenience store Amazon Go earlier. Alibaba has put forward the concept of new retail. The global business tycoons have turned their attention to offline investment and development, including retail chains such as non-staple food chains, department stores and electronic products retail. Both companies clearly have huge data advantages in reshaping and influencing consumer behavior.
With the online brand expectations of the platform is not limited to online, but O2O online and offline. Nike has opened Nike Live stores in Long Beach, California and Tokyo, and the concept of Nike Live focuses on localization, in store customization, digital integration and social activities. Nike said that through continuous analysis of local consumers' online shopping patterns, application and participation, these stores will be able to better cater for the needs of local communities.
However, since April this year, Amazon has begun to adjust its offline retail strategy, shutting down 87 flash stores in the United States, and opening more bookstores and "four-star stores" to provide a more comprehensive customer experience and a wider range of product choices. Earlier, these flash stores, which were set up in the whole food supermarket, Kohl 's store and shopping center, enable customers to try Amazon's products, such as Kindle e-reader and Echo intelligent loudspeaker.
Compared with Amazon, which focuses more on its own brand, Alibaba's online strategy is also more focused on brand services. In July of this year, Tmall opened the first Tmall Club ideal life experience center in Shanghai K11. The aim of the project is to rely on Tmall's data capabilities and new retail tools to enable users to experience deeper operation and transformation offline.
According to fashion business news, Amazon's sales in the third quarter increased 24% to 69 billion 981 million US dollars in the first quarter of this year, more than 68 billion 800 million of analysts' expectations, and AWS net sales rose 35% to 9 billion US dollars, but the group's overall net profit fell 26% to 2 billion 134 million dollars a year.
The total revenue of Alibaba in the second quarter of fiscal year 2020 was 119 billion 20 million yuan, which was higher than the market expectation, which was 85 billion 150 million yuan in the same period last year. After adjustment, the profit before interest, tax, depreciation and amortization was RMB 37 billion 100 million yuan. Alibaba mobile users in the second quarter of the month 785 million, higher than the market estimate of 752 million 400 thousand. Revenue from the core business grew by 40% over the same period last year, reaching 101 billion 220 million yuan.
It seems that Alibaba is becoming a more attractive option for third party brands. Industry analysts generally believe that Nike will not be the last to abandon Amazon's brand, and there will be more brands to emulate Nike's initiatives in the future. Although Amazon still takes pride in its size, it should also provide more value to the brand.
However, Amazon's own brand strategy also provides sufficient stability and profit guarantee for the platform, and is different from the strong Alibaba. The weakening of the platform role also provides a more fair and open commercial space for small businesses without being kidnapped by too many rules.
The future electricity supplier dispute is obviously the competition between Alibaba and Amazon in the two ways.