It comes as no surprise that Amazon is the largest and most powerful distribution network in the world. That’s the kind of thing that brings big brands to the table, like Nike. Two years ago, Nike agreed to a partnership with the E-Commerce giant and began selling on the platform as a first-party seller.
Why?
Nike was trying to prevent the spread of counterfeit goods that resembled any Nike products. They signed with Amazon, in hopes of preventing it and eliminating counterfeits of their products altogether. After three years, the counterfeit problem on Amazon hasn’t subsided, in fact, it’s gotten worse.
So much so that Amazon launched what they called “Project Zero” in March of this year. Where they intended to streamline the process of taking down counterfeit product listings.
Amazon’s Project Zero is meant to empower brands by offering automated protections, which means, Amazon will scan for and remove suspected counterfeit products. Project Zero also includes a self-service tool to give brands the ability to remove counterfeit listings themselves rather than having to report it to amazing and wait for an investigation before any action was taken.
While Amazon’s Project Zero offers brands a way to begin fighting back on counterfeits, the program has fallen short. Sellers of the counterfeit goods can easily get around the system even if they’re reported multiple times. It’s as easy as changing your seller name and clicking publish.
This Project Zero effort seems to be too little too late for Nike, which exited the E-Commerce giant last week.
Some see the positive
According to Barron’s, after the announcement that Nike would pull out of Amazon, Foot Locker’s stock rose about 2.2%. Why? Because in the athletic footwear universe, Foot Locker has retail and distribution down better than anyone.
Calloway Cook, President of Illuminate Labs considers the move just the push Amazon might need: “I think that overall this will actually be a good thing for the Amazon ecosystem because it will prompt Amazon to invest more heavily in copyright protection infrastructure. They’re already moving in the right direction with the Amazon Brand Registry, but third-party sellers which aren’t brand registered should be automatically flagged and banned from the platform. I think that losing a business the size of Nike will force Amazon’s hand and cause them to take the third-party counterfeit issue more seriously than ever before, which will be good for both legitimate brands and consumers in the future.”
Other’s not so much
Lewis Goldstein, President of Blue Wind Marketing said “Nike will probably see an initial drop in sales because they pulled back one of the biggest marketplaces in the world. I think one of the major factors that caused Nike to pull out is the margins. Nike likes to be in control and potentially felt like Amazon was wielding too much power.
Drew Kalinski, Founder of Amztut also feels that control was the issue. “Nike is trying to eliminate friction within their business strategy by eliminating Amazon. Nike stands a far greater chance of fostering better relationships with their customers, by selling directly on their own website. They have greater control over their own content, products, and distribution. So, by focusing on the strongest areas of their business and building a better relationship with their retail partners, it will give Nike a more direct approach to building personal relationships with their own customers.
By selling on Amazon Nike didn’t have much control over its own brand. With 3rd party sellers being able to sell their products and counter fits being sold on their own listings. Nike viewed this as being a negative impact. Not only for their own brand but for their customers as well. Amazon has taken precautions to stop these from happening, but it looks like in Nike’s eyes it wasn’t enough.”
What does this do for Nike?
Nike felt as though it couldn’t fully control its brand or the number of counterfeits on Amazon, so while Nike previously played by the “if you can’t beat them, join them” mentality, that time is up. It’s interesting to note that many are speculating that other big brands may follow suit and leave Amazon as Nike did.
Leaving Amazon allows Nike to focus on exactly what Amazon cannot do for them. Build a community. Nike is more than a pair of shoes or apparel, it’s image to many, garners a sense of community and that is what Nike is truly after. After all, that kind of community is what brings those members back time and time again.
