Blog Post - Frank Kochenash , Nov 19 2019

Nike ended its pilot relationship with Amazon. What does this mean?

Nike ended its pilot relationship with Amazon. What does this mean?

It was widely reported last week that Nike ended its pilot 1P relationship with Amazon. This was Nike's attempt at selling product directly to Amazon for sale on its site (a 1P relationship), to counteract or improve upon the widespread sale of Nike products from 3P sellers. Published interpretations of the event ranged from victory to defeat. One headline pronounced "brands don't need Amazon" and added the requisite suggestion that other brands will or should follow Nike's lead.

These prognostications make good headlines. I suggest a different take on the situation: disappointment, followed by opportunity. Thousands of consumers every day search for Nike products on Amazon, and the current situation is less than optimal for them, as well as for Nike and Amazon. It's disappointing that Amazon could not yet create and install a set of controls or processes to help legitimate brands better control their presence on Amazon. Similarly, it's disappointing that Nike could not yet gain adequate control of its own distribution and pricing to create a better presence on the most popular eCommerce marketplace in the country. Solving these disappointing realities reveals the opportunity still out there for brands as well as for Amazon.

Consider this example of a well-controlled brand presence: I needed a new pair of running shoes. I knew the brand and model I wanted, so I searched on Amazon and found them within two clicks. I wanted to make sure I was getting a good deal, so I went to the brand website and was pleased to find the same shoe there with similar imagery and the exact same price. I then checked Google Shopping. The handful of retailers at the top of the search listings there also had the same price. Confident in my decision, I purchased from Amazon because I'm a Prime member and I value the 1-day delivery option.

How is this experience bad for the brand? It's not. In fact, I spot checked a few of this brand's other Amazon Standard Identification Numbers (ASINs) and found similar consistent results across channels and retailers. (Sure, a direct sale and access to the customer would be preferable, but this is still a good experience)

Compare that with Nike's results on Amazon. Even within one style of running shoe there are multiple prices. I copied and pasted one of their top-ranking shoes and searched their brand website. I found it available there with similar imagery, but with a significantly higher price. I also price checked Google Shopping and found a range of prices and images, some obviously not professionally made.

If this the type of experience a brand wants? Certainly not. Is this Amazon's fault or Nike's fault? That's a good question.

The implications for brands? Amazon is a large and potentially valuable distribution channel. But it requires your brand to be under control. In many ways, Amazon exposes flaws in your distribution network, your pricing, and your promotions strategy. If your presence on Amazon is messed up, by all means, press Amazon to improve its tools and processes to help you. But first, heal thyself. Get your retailer and distributor agreements and operations under control. Establish guidelines for who can sell products on the 3P marketplace and at what price. Ensure pricing and promotions are consistent in time and understanding of how automated price matching tools will handle them. Ensure your imagery and onsite merchandising is consistent across channels, yet optimised to each, including Amazon. Doing these things improves your presence in the eyes of consumers on Amazon and across eCommerce, regardless of what Amazon does.

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