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Once upon a time, popular brand manufacturers held great sway over their physical retail partners. They could insist on certain display rules, demand massive shelf space, and dictate the sale prices of their popular items. Nike, as one of the most popular brands of footwear and athletic apparel, was also among the most demanding, requiring retailers such as Sports Authority and FootLocker to follow strict rules if they wanted to receive its products in their stores.

Obviously, the arrival of Amazon induced some changes in the retail market, but initially, those changes were not enough to convince Nike that it should sell through the site. For years, Nike has resisted providing products for Amazon to sell its shoppers, with the general sense that its popularity meant that it did not need to rely on an external channel. In addition, manufacturers have relatively less control over the presentation of their products on Amazon, and Nike worried about damage to its brand image and differentiation, if its cool shoes and gear were presented in the plain product pages that Amazon uses for all its products.

But what Nike did not realize is that its shoes were going to be on Amazon anyway, whether it provided them directly or not. With the growth of third-party sellers on Amazon, there is plenty of Nike gear to be had through the site—so much so that Nike is the most purchased apparel brand on all of Amazon. There are no laws or regulations that limit people obtaining goods legally and then reselling them through Amazon. Although Amazon works to police these sellers, to prevent the spread of gray market or counterfeit products, it would be impossible to monitor every one of them.

Thus, Nike was losing sales to Amazon, despite its efforts to spurn any sort of relationship with the retailer. Recognizing that it could not win this battle, Nike decided that it would supply Amazon with a flood of merchandise, in the hope of beating out some of the third-party sellers with which it was competing for customers. In return for receiving the product line, Amazon promised to redouble its efforts to eliminate counterfeit items from its site, and it imposed limitations that would not permit third-party sellers to offer certain Nike products at all.

According to a spokesperson for adidas, which has sold through Amazon for several years already, the downsides remain. The brand has little control over its image, and the flood of merchandise makes it difficult to establish an image of exclusivity. Thus, adidas makes a careful distinction: Amazon is for transactions, because that’s where customers look when they are ready to make a purchase. But its own dedicated sales channels are where its brand-building efforts focus, so that it can continue to establish itself as a desirable brand.

Discussion Question:

  1. Predict the outcome of Nike’s new deal with Amazon. Will it follow a path similar to adidas, or is it different in its approach?

Source:Laura Stevens and Sara Germano, “Nike Thought It Didn’t Need Amazon—Then the Ground Shifted,” The Wall Street Journal, June 28, 2017