American kit manufacturer Nike recently decided to terminate the partnership it arduously entered into with Amazon 2 years ago, representing a major setback for the Internet giant, which is notably suffering from the lack of customer experience on its platform.
The decision was certainly a hard blow to Amazon, with Nike announcing that it will no longer be selling its clothing and trainers directly via the e-commerce platform – quite a significant move when you consider that the brand’s products feature at the top of Amazon’s product search listings!
You might remember that the partnership was only forged two years ago following a period of negotiation and a number of compromises on both sides. Nike committed, at the time, to opening an official store on Amazon, and Amazon promised to actively fight counterfeit Nike products on its platform and to reject certain third-party sellers. Two years later, the partnership has finally been terminated by the American kit manufacturer.
The announcement comes less than a month after John Donahoe – CEO of eBay from 2008 to 2015 – was appointed CEO of Nike.
Amazon’s black spots
“As part of Nike’s efforts to improve the consumer experience by establishing direct and personal relationships, we have decided to end our trial partnership with Amazon Retail”, a brand manager announced. The customer experience is certainly one of Amazon’s major weaknesses, at a time when all other brands are realising that they need to establish a commercial environment that really enhances their products and their relationships with their customers.
However, it is not the only reason for Nike’s decision to cut its ties with the platform, with counterfeiting also being a matter of the utmost importance. Despite the Project Zero programme launched by Amazon to allow brands to remove counterfeit products directly and Transparency – another anti-counterfeiting system -, the fruits of the platform’s efforts have been far from convincing.
Furthermore, the e-commerce platform’s pricing policy, which is based on a series of algorithmic calculations, also seems to have played a role in the decision.
Boosting direct sales
Nike, for its part, is attempting to verticalise its business model and sell more and more directly, and with this in mind the brand has embarked upon a transformation plan aimed at making selling directly to consumers its main driver of growth via the digital sphere (e-commerce site and app) and its flagship stores in New York and Shanghai. In doing so, it aims to ensure that online sales account for 33% of Nike’s turnover (which amounted to $39.1 billion in 2018-2019 – up 7% in a year) as opposed to 15% today.
One thing for certain is that times are getting tougher for the GAFA companies. They are losing the supremacy on which they have based their success over the past 10 years and some brands are now feeling strong enough to consider developing their business without them, which has to be a good sign, doesn’t it?