Nike Inc.’s decision to begin selling some items on Amazon.com will almost immediately limit Amazon Marketplace sellers’ ability to sell certain Nike items. But the bigger story may be that as Amazon.com Inc. forges more deals with major brands it will undermine the business of retailers that sell those brands’ products, whether online or offline.
Amazon began notifying some marketplace sellers earlier this month that they will no longer be permitted to sell certain Nike products on Amazon.com’s U.S. e-commerce site as of July 13.
Among those receiving such notifications was Street Moda, an online footwear retailer that sells on several online marketplaces, says Matt Kubancik, Street Moda’s president and founder. The email from Amazon noted, “This action is not being taken due to any performance issues with your account and you will still be able to sell other products that you are approved for.” Among the products it will not be permitted to sell are a T-shirt and a pair of men’s shorts. Kubancik says 5-10 SKUs were covered by the ban, while Street Moda can still sell about 50 other Nike SKUs on Amazon.
This is not the first time Amazon has restricted third-party sellers after forging an agreement with a major brand, says Kubancik, who also is co-founder of SkuVault, a warehouse management system used by about 1,000 e-retailers. He says SkuVault clients previously received notices that they would not be able to sell items from brands like Asics and Under Armour Inc., without permission from those companies, after those brands began selling their products on Amazon.
Nike’s decision to begin working directly with Amazon “is a recognition that Amazon is a market that can’t be ignored,” says Frank Poore, CEO of CommerceHub, which provides fulfillment and marketplace management services to some 10,000 brands, including 43 online retailers in the Internet Retailer 2017 Top 1000.
One reason Amazon, No. 1 in the Top 1000, is hard to ignore is that marketplace merchants already sell Nike products aggressively on Amazon.com: There are 73,468 results for Nike products on Amazon.com today. Many of those merchants selling products from big brands like Nike buy merchandise from those brands’ outlet stores or from retailers holding overstock merchandise, mark them up and then sell them on marketplaces like Amazon, eBay and Walmart.com. While that’s legal, brands often complain that those sellers don’t display products properly and undercut the prices of major retailer customers.
“Having Nike involved where Amazon can help Nike clean up the problem with third-party sellers is a huge win for Nike,” Poore says. “Amazon gets a huge brand and it will quickly become the mainstay for Nike. It will be the place to go.”
There are indications Amazon already has been policing Nike product sellers, perhaps as a show of good faith. In the past year Amazon has removed or merged 30% of the listings for Nike shoes, says 3PM Marketplace Solutions, a company that specializes in collecting and analyzing data from online marketplaces.
It’s part of a broader push by Amazon to win over brands that in the past have refused to sell to Amazon, and in many cases brands have restricted the retailers they sell to from selling on Amazon, says Bruce Work, a co-owner of Acktify, a retailer that sells some 400 online brands on marketplaces, including Amazon. Among the major brands that have started selling on Amazon in the past year or so are Ikea, Chanel, Levi’s and Under Armour, Work says.
To woo these big names, Work says, Amazon has beefed up its Amazon Brand Registry. The program allows trademark holders to register their products and then police Amazon.com merchants that are selling below the minimum price the brand has set, using poor images or selling out-of-date products. Brands can designate resellers to enforce their trademarks through the Brand Registry program, and Work says Acktify plays such a role for four client companies that together control 16 brands.
Just in the past five weeks, “we have been given the opportunity to enforce pricing and pull content down” from unauthorized sellers, Work says.
Amazon also is offering other sweeteners to brands, including reducing its commissions if a brand decides to sell on Amazon.com as a marketplace merchant, he says. In one case, Amazon offered Acktify a reduction in commission to 7% from 15% if it would begin offering that brand’s merchandise on Amazon.com, Work says.
He understands Nike has been offered free Fulfillment by Amazon services, with Amazon handling warehouse and shipping of products, a service that typically costs sellers about 12%.
Nike did not respond to a request for comment. Amazon said it would not comment for this story.
Work expects Amazon ultimately will provide big brands like Nike sections of Amazon.com that the brands can control and design to fit their liking, but that such a program may take a year or two to roll out.
Meanwhile, he says, bringing on more big brands advances Amazon’s stated goal of having half of all products available on its site Prime-eligible, as these big brands will either be incented to use Fulfillment by Amazon or approved for Amazon’s Seller Fulfilled Prime program in which marketplace merchants that have strong fulfillment records get their products labeled as Prime-eligible. As of earlier this year, 13% of physical items on Amazon.com were Prime eligible, up from 12.2% in the third quarter of 2016, including 22.9% of media products and 9% of other items, according to a survey by analyst Colin Sebastian of investment firm Robert W. Baird & Co.
With the steps Amazon is taking to engage with big brands, “the spigot is opened to get a larger penetration of Prime,” Work says. “That’s Amazon’s brand, Prime.”
The ultimate losers will be other retailers selling brands like Nike and Levi’s, which consumers will now be able to buy on Amazon. “All the brands that Macy’s sells that aren’t private-label are going to be on Amazon,” he says.
One retailer that foresees losing sales of Nike products to Amazon is Adam Flanders, online sales manager at Shively Sporting Goods, which operates a store in Louisville, Ky., and sells online at ShivelySportingGoods.com. Fortunately, Flanders says, most of the Nike products it sells are directly to school, university and youth league teams, and those won’t be affected by Nike selling on Amazon.
But sales of Nike products on ShivelySportingGoods.com likely will be affected, he says. “How is my website going to compete with Nike.com and now Nike selling on Amazon?” he says. “There’s no way we can compete with that.”