When I started BranchLabs, I remember friends and family asking if I was concerned about Amazon eating up the entire eCommerce world—us included.
I don't get that question too much anymore.
Amazon plays in a niche. It's a massive niche and they play it well, but it's still a niche. As Amazon has grown, it's become apparent to more consumers and commentators that they're not the one stop shop they want to be.
Selling on Amazon works wonders for some products. It's less beneficial for others. One product type marketers often have issues selling successfully on Amazon are those with a strong brand. Products like Nike's. Bloomberg reported on Nike's split with Amazon today—
The athletic brand will stop selling its sneakers and apparel directly on Amazon’s website, ending a pilot program that began in 2017.
Executives hoped the move [to sell directly on Amazon in 2017] would give them more control over Nike goods sold on the e-commerce site, more data on their customers and added power to remove fake Nike listings. ... Nike reportedly struggled to control the Amazon marketplace. Third-party sellers whose listings were removed simply popped up under a different name.
Channel conflicts. Counterfeits. Resellers undercutting MAP policies. Inability to tell brand stories in a compelling way. No ability to connect with your consumers post-purchase. Amazon can be a great way for new potential customers to learn about your product, but it's rare that a brand can defensibly sell on Amazon alone.
We've worked with clients who've ceded too much land to Amazon and other retail partners. Clawing back from these issues can be tough, but for high quality, non-commodity products it's often worth the effort.
Even if you sell on Amazon—and there are certainly good reasons to do so—there are often more reasons to invest in eCommerce sales on your own platform:
- You can actually tell your brand's story through more experiential product pages and brand specific informational pages
- You can establish a relationship with your customers since you have access to email addresses and phone numbers—something Amazon doesn't share
- You're likely to have higher margins, since there aren't any steep Amazon fees to deal with
These are the benefits Nike's going after. The move off Amazon is in line with their Consumer Direct Offense strategy, which they announced in 2017. The strategy, accompanied by a management reorg, was a externally visible manifestation of their D2C focus. From their press release announcing the strategy:
Leveraging the power of digital, Nike will drive growth — by accelerating innovation and product creation, moving even closer to the consumer through Key Cities, and deepening one-to-one connections.
Though the Consumer Direct Offense reorg was only announced in 2017, Nike had been investing in growing their more defensible D2C business for years prior.
About 68% of Nike’s annual sales come from wholesale channels, down from 81% in 2013. Though wholesale is still the bulk of the company’s sales, in that span Nike’s direct business has grown three times faster than top-line revenue.
Their move off Amazon is a big one, but until Amazon gives brands better tools to manage their products on the marketplace, cutting ties might be the best option available to some brands.