Can Nike Go To "Independence" With Amazon?

In 2017, when Nike began selling products directly on Amazon's website, it felt the pressure, because unauthorized sellers had already swept the Amazon website and needed to squeeze into the explosive growth of online retailers. Nike's core belief is "brand value", so this is an important issue for the company. The aim of the deal is to better control prices and inventory. Nike managed to secure an agreement from Amazon to monitor the third party sellers and counterfeit products more forcefully.

However, things obviously did not go according to plan, and Nike did not think that it got the expected benefits from cooperation. Today, Nike is one of the best-selling brands on Amazon, but most of its sales go to unauthorized third party sellers, and third party sellers are often referred to as parallel markets. Counterfeit goods are still on sale on the website. Now, Nike is pulling out, not selling products directly on Amazon's website.

Independent sale

For the following reasons, Nike is in a very advantageous position in the competition with Amazon. First of all, its own retail business, including its website, is promoting sales. In the fiscal year ended May 31, 2019, it accounted for about 32% of Nike's total revenue, of which 35% grew from digital channels.

It is reported that Amazon's sales account for only a small part of Nike's revenue, and Nike looks good. It can make up for lost sales through its own channels and other partners.

Nike said the deal with Amazon was a pilot test and did not list new products or best-selling products on the website. It has been keeping these things for its website and 1100 stores. Among its 30000 global retailers, Nike also has close cooperation with Foot Locker, Nordstrom and Dicks Sporting Goods.

As an identity brand, Nike has strengthened its position by investing in its own websites and apps, or working with retailers to enhance its image.

Why Amazon is not important

It is reported that third party sellers account for 60% of Amazon's sales. The online retail giant has become a huge and difficult market. People do not always know who the seller is, whether the sales are authorized or even whether the goods are genuine.

Nike is a brand of high status. Its target customers are those who seek a real, technologically advanced product. The company has positioned itself as brand value, which adds a cost to consumers. Those looking for trading opportunities on Amazon are not what Nike wants to cultivate.

Nike's withdrawal from Amazon seems to indicate that it is a leading brand and bets in this direction, which will enhance its position and generate sales in a group willing to pay for it.

　　 Look at these numbers.

In fiscal year 2019, sales of digital products amounted to US $3 billion 800 million, close to 10% of total sales. As of the first quarter of fiscal year 2020, that is, in September of this year, Nike's sales of digital products increased by 42%. Users can see the latest style through the SNKRS application, the application continues to grow rapidly, and the Nike application that users can purchase products and keep in touch with the Nike community is generating more and more sales, contributing to the electronic business of the company in the 2019 fiscal year of 3 billion 800 million dollars.

Mark Parker, the outgoing chief executive, said: "it has become the largest and fastest growing platform for our portfolio, which has grown by nearly three digits in the current quarter." Nike's revenue in the Chinese market has increased by 27% in the last quarter, and the Chinese market will launch this application during the festival.

Competitors also gained more sales through e-commerce. Sales of Adidas (Adidas) digital products increased by 14% in the quarter, and sales of Lulu lemon sporting goods increased by 31%. As shopping moves to the Internet more and more, building customer loyalty through its own company websites, applications, club projects and innovative SNKRS applications will help Nike's long-term development.

While investing in e-commerce, Nike is expected to benefit from further changes in online sales, such as retail and sports. Obviously, the company does not think Amazon needs to achieve this goal.

　　 Direct channel strategy

Nike plans to focus on direct selling channels at several levels. Here are some things that the company is doing:

Create a community that allows customers to feel connected with the company. "We have been bringing real value to the lives of members," Parke said at a conference call in September. Our team is making full contact with more people in different ways, so that they can come back for more help. " He said that in the past three years, the number of active users of Nike apps has doubled, and half of the sales growth in the last quarter came from within the community.

The company is linking digital applications to physical stores. Nearly 1 million applications have been registered through the store's customer service in the just concluded quarter.

Nike offers special services in its stores and applications. Potential buyers can determine the most suitable size through digital foot scan.

Nike acquired the data analysis platform Celtec to explain the customer data of its stores and make use of these data to make better design and inventory decisions.

Therefore, although Nike may cut off its sales sources, it is working hard to maintain its growth and maintain stable investment.