hnnhcronin On June 29, 2017, Nike CEO Mark Parker confirmed that Nike will be selling some of Nike’s sought after athletic shoes on Amazon. Originally opposed to helping the online retail giant gain momentum, Nike refused to sell their products through Amazon. The athletic retailer has changed its tune as Amazon shoppers have found ways to purchase Nike through third party vendors, purchase Nike products and then sell them on Amazon for higher prices. Some of these third party vendors are selling knock-off Nike items. In order to have more control over the distribution of its products and prevent any third party vendors from profiting at its expense, Nike agreed to form a partnership with Amazon. Initially, Nike will only sell a select few items through Amazon, but will likely expand its selection of shoes and clothing in the future.
This partnership is expected to give Nike an advantage against its competitors, such as Under Armor and Foot Locker, as Nike capitalizes on the e-commerce trend and Amazon’s powerful distribution structure. The athletic retailing space is having the same issues that traditional retailers are facing: decreased foot traffic in physical stores. Sports Authority filed for bankruptcy in March, as it was unable to compete with other athletic retailers. After the Nike-Amazon deal was announced, shares of Foot Locker and Big 5 Sporting goods dropped dramatically.
Nike’s strong performance so far for fiscal 2017 will benefit Amazon and Nike. For the most recent quarter, Nike reported a 5% growth in revenue caused by tapping into emerging and overseas markets. In response to Nike’s earnings release and news of the Amazon partnership, shares of Nike rose 4.8% in after-hours trading. Nike is doing fairly well on its own, but partnering with Amazon would allow it to expand its e-commerce market. Amazon will benefit from this deal as well because it will share in the profits made by Nike purchases. The Amazon-Nike deal will allow Amazon to expand its selection of athletic wear, which will aid its growth prospects. This deal illustrates Amazon’s seemingly unstoppable expansion into all areas of retail as well more traditional retailers inability to compete.
Sources:
Ganesan, Gayathree. “Nike-Amazon Deal May Hurt Sporting Goods Retailers: Analysts.”Reuters,
Thomson Reuters, 30 June 2017, www.reuters.com/article/us-nike-amazon-com-idUSKBN19L2LO.
Germano, Sara. “Nike Confirms Partnership With Amazon.” The Wall Street Journal, Dow Jones &
Company, 29 June 2017, www.wsj.com/articles/nike-reports-sales-gain-despite-weak-growth-in-north-america-1498770462.
Wattles, Jackie. “Nike Confirms Amazon Partnership.” CNNMoney, Cable News Network, 29 June
2017, money.cnn.com/2017/06/29/technology/business/nike-amazon-shoes/index.html.
