SKU’d Thoughts 40: What lessons can new brands learn from Nike’s discontinued partnership with Amazon?

Last week, Bloomberg reported that Nike will end a two-year partnership of selling its sneakers and apparel directly on Amazon’s website. 

There are some key lessons from this discontinued partnership every new and old brand can learn from. 

1.Own your customer experience 

Nike’s official statement to Bloomberg cited a “focus on elevating consumer experiences through more direct, personal relationships” as its reason for no longer directly selling on Amazon. This is no surprise as other top DTC brands have shied away from directly selling on Amazon because of a lack of control. The importance of customer experience to a brand can’t be overstated enough; in fact, I came up with a formula for it. Amazon has a great customer experience, shoppers get their items quickly and the site’s return policy is very lenient, all of which bodes well for Amazon shoppers because even if they order a pair of counterfeit Nike sneakers, they can easily return them. On Amazon, the customer experience is only optimized for Amazon and the shopper so the brand selling on the site is often an afterthought. In Nike’s case, a partnership did nothing to preserve brand integrity. Nike is better off focusing on its own direct-to-consumer avenues, like the Nike app and Nike.com, and specialty retailers like Footlocker for improved customer experience. 

2.Understand any potential new consumer

Nike partnered with Amazon in an attempt to regulate its products when they appeared on the site by fending off unlicensed distributors and counterfeit items on Amazon. What the footwear giant did not account for was that these same distributors and third-party sellers had already built up a ton of reviews from past transactions. Those reviews provide the sellers with a level of “trust” with the typical Amazon buyer who over-index the number of reviews when shopping. Since official Nike products had fewer reviews, they received worse positioning on Amazon.com which often translates into fewer transactions. Had Nike thoroughly measured what variables were key to Amazon shoppers, they could have planned or integrated them into the partnership. 

3. Know when to cut your losses 

Two years ago, Nike’s partnership was heralded as a no-brainer because it would allow Nike to undercut counterfeiters. They discovered that clamping down third-party sellers was more difficult than first anticipated with new sellers often popping up under different names after they were removed. Amazon, along with Footlocker, JD.com, and other specialty retailers, was originally part of Nike’s 2017 direct to consumer strategy known as Consumer Direct Offense, which the company describes as “accelerating innovation and product creation, moving even closer to the consumer through Key Cities, and deepening one-to-one connections”. The overall strategy has been a success with Nike posting huge gains in recent quarters. But after recognizing Amazon as a nondriver of these gains, they decided to cut their losses and focus on key partners. 

Cross posted on Medium