In summer 2017, Nike made waves with the announcement that it was joining Amazon Brand Registry. This marked the first time Nike would officially wholesale its footwear and apparel products to the global ecommerce platform. In exchange, Amazon would ban any other third-party sellers from selling Nike sneakers or apparel and crack down on counterfeit products. The move represented an interesting calculation: Work with the retailer that some consider a brand-killer in exchange for squashing all of the other merchants selling Nike products on Amazon without the brand’s consent. It was a purely defensive play. 

The backstory

The partnership had been years in the making. Nike and Amazon executives had met as early as 2010, soon after Amazon’s purchase of Zappos (which sells Nike products) to discuss a broader partnership. At the time, Nike was not interested. But when the company launched its FuelBand in 2012, it tried selling on Amazon because it’s an electronics destination. However, Nike was not pleased with Amazon’s merchandising strategy and the inability to control the presentation of its products. While the FuelBand was discontinued in 2014, Amazon’s charm offensive continued over the following years. Jeff Wilke, one of Jeff Bezos’ top executives, personally appealed to Nike executives while other Amazon leaders made multiple trips to the company’s respective headquarters in Oregon and Seattle. 

Meanwhile, Nike’s competitors Adidas and Under Armour started selling on Amazon, with Adidas officially joining in 2014. Its chief executive said at the time that “Amazon is the best, without any comparison, transaction platform in the world…. It might not be the best brand-building platform in the world, but that’s why we…separate crudely between transaction and brand-building.” Adidas did the best it could by allowing its mass-market products to sell on the platform while restricting the supply of products like Yeezys, a move which, somewhat ironically, pushed these products into the resale market—another sales channel brands don’t control. 

During this time, Nike became the most purchased apparel brand on Amazon, according to Morgan Stanley, with thousands of products available for sale from hundreds, if not thousands, of different merchants. Amazon was making money on Nike products without the brand’s consent; Nike started to realize it was losing leverage. This lack of control—and the thought that it could take it back—led Nike to join Brand Registry in summer 2017. 

The terms of the deal dictated that Nike would wholesale a small amount of product to Amazon while the retailer would limit what could be resold by making it harder for illicit sellers to list Nike products. At the time, the partnership was billed as the first step towards a broader relationship between the two companies, even if Nike remained a reluctant participant.  

A few weeks later, Nike announced it was overhauling its distribution strategy and eliminating 99.86% of its wholesale distribution partners to focus on only 40 key accounts. Amazon was one of the 40. The overhaul was part of Nike’s goal to grow digital sales from 15% of revenue to 30% over the next five years and to move away from “undifferentiated, mediocre retail.” Then, towards the end of 2018, Nike expanded its Amazon program even further with then-CEO Mark Parker saying that “the important part is that we enhance the brand through better presentation and then the sharing of data so we can better serve consumers.”

Just over two years after Nike joined Brand Registry, the brand ended its official relationship with Amazon. The outcome is not surprising, but it speaks volumes about Amazon’s control over brands and how brands can respond.  

What it means for Nike

While Nike’s relationship with Amazon was defensive in nature, it ignored the reality that Amazon’s retail business thrives off of third-party, not first-party sellers. Jeff Bezos dedicated the opening of his 2018 shareholders letter to the shift from first-party (wholesale) to third-party (marketplace) sales. 2015 was the first year third-party sales represented a majority of its revenue.

It’s either impressive or delusional that Nike held out for two whole years since Nike had no leverage to compel Amazon to police third-party sales. They are, after all, the very mechanism that drives Amazon’s business. While the partnership was in effect, Nike struggled to fend off third-party sellers, even with Amazon supposedly in its corner. The brand’s official listings had fewer reviews than many of the unofficial ones, which meant it ranked lower in search results. Before Nike even announced it was ending its program, Amazon had already started recruiting more third-party sellers to sell Nike products—the ultimate proof that Amazon did not need Nike’s participation to sell Nike products.  

Birkenstock CEO David Kahan, who has been an outspoken critic of Amazon, applauded Nike’s reversal, saying, “I am actually quite satisfied since they gave it a chance over 24 months…. But when the largest brand in the entire footwear business can’t find a way to make it work, it clearly makes a statement.” Nike has since tried to downplay the partnership a “small pilot,” which belittles the significance of what happened. Regardless of PR-induced semantics, the impending return of third-party sellers on Amazon hawking Nike products will only make Nike’s policing job harder, especially with no official relationship with Amazon leadership, who are known to highly value loyalty. 

What it means for other brands

Nike’s retreat from Amazon means that other brands who value their image and customer experience, sometimes at the expense of maximizing revenue, will have little success in the future—if Nike couldn’t, how could anyone else? While Amazon is unavoidable given the sheer size of its audience, Shopify has been at the forefront of building tools for brands that want to take a different path. Shopify merchants sold over $2.9 billion during Black Friday 2019 versus $1.8 billion the year before, a rising tide that will continue giving brands the confidence to focus on platforms where they can control the data and experience.   

Brands can’t play defense against Amazon. They either need to accept the tradeoffs of selling on the platform or focus on building their own brand well outside of Amazon’s ecosystem. The only way they can do that is by providing customers with a compelling set of reasons to only shop with them. 

Today, Nike earns 68% of its revenue through wholesale, versus 81% back in 2013, and its direct business has grown three times faster than overall topline revenue, proof that it’s trending in the right direction. Nike’s Amazon retreat should empower the brand to be laser-focused for the foreseeable future on building its direct-to-consumer business and pushing its customer experience even further. Focus on what you can control and ignore what you can’t. That is the one lesson from the Nike-Amazon saga that every brand can learn from.