(Bloomberg) — Amazon.com Inc. will begin selling Nike shoes directly through a brand-registry program designed to keep counterfeit goods off the site, according to a person familiar with the situation.
The approach lets Nike Inc., No. 37 in the 2017 Internet Retailer Top 500, take greater control over how its products are sold, helping ensure that knockoff shoes aren’t offered by third parties on the e-commerce marketplace, said the person, who asked not to be named because the arrangement isn’t yet public.
Shoes are popular products for counterfeiters, and Nike’s global brand is an especially alluring target. That’s put pressure on the athletic-apparel giant to police online sales more aggressively.
Lindsay Drucker Mann, an analyst at Goldman Sachs Group Inc., said earlier that Nike may be close to forging a closer relationship with Amazon (No. 1). Currently, Nike is available on Amazon’s Zappos site, but not directly through the parent company.
It’s unclear how much more Nike merchandise might ultimately flow through Amazon, but the prospect of a special relationship between the two companies sent shoe-retailer stocks tumbling. Foot Locker Inc. (No. 53) plunged as much as 11%, while Finish Line Inc. (No. 114) fell 5.9%. Dick’s Sporting Goods (No. 56) dropped more than 9%. European sellers Sports Direct International Plc and JD Sports Fashion Plc declined as well.
Nike gained as much as 1.8% to $52.49 on Wednesday, bringing its year-to-date gain to more than 3%. Amazon gained as much as 0.6 % to $998.70.
Direct Push
The Amazon partnership is part of Nike’s push to boost sales directly to consumers to revive slowing growth that has weighed on its stock. Just last week, Nike announced a structural overhaul, including cutting 1,400 jobs, to increase focus on direct. The company’s wholesale business — selling to retailers like Foot Locker — still makes up about 75% of Nike’s revenue, but has been hurt by the woes of retailers. Last quarter, direct-to-consumer revenue rose 18%, more than three times the growth rate of top-line revenue.
The deal would help Nike clean up the inventory that shows up on Amazon through third-party sellers, Goldman’s Drucker Mann said. It would also allow Nike to compete better with Under Armour (No. 36), which already sells via Amazon, and give it exposure to millennial shoppers, she said. She estimated Nike’s move could eventually boost revenue by 1% and push more brands to carry out similar deals.
Machine Learning
When brands work directly with Seattle-based Amazon, they can point out violations and have the counterfeit goods removed. Amazon eventually aims to use machine learning to detect knockoff products before they’re even posted to the site, the person familiar with the matter said.
Almost 2,000 branded products are registered in the Amazon program so far, including Victoria’s Secret, Toms, Patagonia, Johnson & Johnson, Clorox and Procter & Gamble, the person said.
Amazon’s anti-counterfeiting efforts appear to be working. Sandal-maker Birkenstock USA, which last year announced it would stop selling products on Amazon due to concerns about fakes, said Wednesday that it had “seen improvements on the Amazon marketplace addressing our core issues of unauthorized sellers and counterfeit goods.”
“As a result, we have continued to allow select third party sellers to list Birkenstock products on Amazon.com in the U.S,” the company said.
Favorite