The Wall Street Journal recently reported that Nike has agreed to sell some of its products directly on Amazon.com. Sara Germano and Laura Stevens wrote:
“While Nike sells its shoes and sportswear through department stores and specialty retailers, it has refused to sell directly to Amazon, fearing it would undermine its brand. But with traffic to traditional stores on the decline and chains like Sports Authority disappearing, Nike has been ramping up efforts to sell directly to consumers, especially its own e-commerce efforts.
Nike executives have been in talks with Amazon for weeks about cracking down on counterfeit product and the proliferation of unauthorized third-party sales on the site, this person said. The two companies have reached an agreement where Nike would agree to provide some product directly to Amazon in exchange for Amazon policing counterfeit and third-party sales, this person said.”
This quote captures the sentiment many in the industry had for years about the relationship between Amazon and brands. While brands can refuse to sell on Amazon, they cannot strictly block everyone else selling their products on the site. Which means that Amazon can approach them, and offer better policing of counterfeit products and marketplace sellers, in exchange of them selling directly.
Some experts in the industry we talked with about this said that this is a risky business practice by Amazon. They believe that this poses risk to Amazon of investigation for colluding with manufacturers to fix prices.
For as long as the brand is not selling products on Amazon itself, or to Amazon, it’s up to the marketplace sellers to contribute content and establish pricing. But once the brands realize that the most visited e-commerce website is completely out of their control, they start to look for solutions. Things get especially frustrating for brands with strict MAP pricing policies, which they cannot enforce on Amazon at all.
Finally, the brand says “What will it take?”
In The Unsolvable Headache of Counterfeit Goods in Amazon Marketplace we wrote that solving counterfeit is a unscalable problem, involving manual processes which are hard to perfect. In this case, Amazon is offering Nike better treatment than other brands.
From the marketplace point of view, we are sticking to our position that resellers are an increasingly risky business. Brands much smaller than Nike are having the same conversations in their board rooms, and coming to the same conclusions. It being that for a brand to have control of their pricing and content they have to do it themselves.
Many of the top marketplace sellers have been entering into exclusive deals with manufacturers to offer similar assurances. In exchange of only selling to one seller, the seller will adhere to MAP policies, manage and improve content, etc. All because the marketplace model of “anyone can sell anything” doesn’t work well when brands want control.
This Nike deal is special because it is one of the largest brands ever which couldn’t no longer ignore Amazon. For as much as they invested into brick-and-mortar stores and their own online presence, Amazon has grown too big to just leave for third-party sellers to have a go at.
In one way, this is showing the success of Amazon. For consumers this means that few products won’t be available on the site. Instead of buying everything on Amazon, but having to go to Nike.com for Nike products, customers will be able to get everything on Amazon.
But despite the excitement this is a display of Amazon’s power. Amazon has grown big enough that it can make brands do what it asks them to do. And as much as brands want to fight this, eventually they’ll have to succumb to Amazon’s rules. While potentially great for customers, this is scary for every other business.