Nike No Longer Runs From Amazon -- WSJ
22 June 2017 - 5:03PM
Dow Jones News
By Sara Germano and Laura Stevens
Nike Inc. has agreed to sell some of its products directly to
Amazon.com Inc., a person familiar with the matter said, a
concession by the sneaker giant that it can no longer afford to
ignore the online retailing behemoth.
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.
Both of Nike's biggest rivals, Adidas AG and Under Armour Inc.,
sell some of their products directly to Amazon, which has been
working to add fashion brands and apparel to its inventory.
News of the Amazon deal punished shares of retailers, with Foot
Locker Inc. falling 5% and Finish Line Inc. down 4%. Shares of Nike
gained 2%.
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.
Nike and Amazon declined to comment, as did Foot Locker and
Finish Line.
It wasn't immediately clear when Nike would begin shipping
product to Amazon. Last week, Amazon began notifying third-party
sellers that they have until July 13 to stop selling certain Nike
products.
The agreement between the two companies comes as both are making
changes to their strategies. Amazon on Tuesday launched Prime
Wardrobe, a service that lets customers try on apparel at home
before deciding on a purchase.
Last week, Nike announced plans to eliminate more than 1,000
jobs, or about 2% of its workforce, and scale back the number of
sneakers and sportswear it makes. Nike sales have declined in
recent months as the sportswear industry grows more
competitive.
The changes at Nike, along with the new partnership with Amazon,
raise questions about how established retailers will be affected.
Foot Locker and Finish Line each identify Nike as their largest
vendor in securities filings, accounting for 68% and 71% of
merchandise purchased last year, respectively.
"While this certainly wouldn't impact trends overnight, we do
think such a development would represent another headwind for a
sector that can't catch a break lately," said Charles Grom, an
analyst at Gordon Haskett Research, saying it department stores
face the biggest risk.
Nike makes and distributes product along different tiers, so
retailers like Foot Locker receive a different assortment than that
offered at Kohl's or Macy's. It is unclear which tier or tiers of
product will be offered to Amazon.
Nearly three-quarters of Nike's sales, or $22.6 billion, came
from wholesale partnerships for the year ended May 2016, though the
company has put greater emphasis on selling more directly to
consumers. The company has launched new sales apps and opened new
flagship stores, and is enticing customers to buy popular products
like self-lacing shoes by making them available through Nike's
sales channels first.
Write to Sara Germano at sara.germano@wsj.com and Laura Stevens
at laura.stevens@wsj.com
(END) Dow Jones Newswires
June 22, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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