Chills jumped up the spines of grocers and purveyors of athletic footwear alike last week after reports the e-commerce behemoth would spend $13.7 billion to acquire Whole Foods and strike a direct selling relationship with Nike. The Street reacted strongly to both developments. The Nike news negatively impacted the stock prices of other industry retailers, including Dick’s, Hibbett Sports and Foot Locker. While some circles immediately suggested the response was overblown, others weighed in positively on a stronger Nike-Amazon bond and NKE shares gained 3.7 percent for the week.
A Motherboard columnist, reacting to Amazon’s growing influence in nearly every marketplace, was the most scathing, suggesting the Jeff Bezos-led company “is trying to control the underlying infrastructure of our economy.” Author Stacy Mitchell, in detailing Amazon’s growing dominance in everything digital commerce, cites a Silicon Valley venture capitalist last year who called it “a multi-trillion monopoly hiding in plain sight.”
Still, Nike’s intent with any Amazon partnership is clear—get closer to the Millennial shoppers worldwide and tighten the grip on the site’s third-party vendors who have been known to tarnish the Swoosh brand image with their sales of counterfeits. It’s unlikely the Swoosh wants to alienate its other large traditional retail partners, each of whom remains vital in Nike’s mission to reach $50 billion in annual revenues. For example, Nike will likely aim to keep its Amazon merchandise mix largely varied from what can be found in a Foot Locker or a Dick’s. Or, at the very least, keep a tight rein on Amazon allocations of premium, in-demand products. Besides giving Nike better access to Millennials, who have called Amazon their preferred shopping platform for fashion, the distribution channel will provide the company with a strong platform for a better brand presentation.
“Nike doesn’t want to put other companies out of business. It wants to expand the pie,”
“Nike doesn’t want to put other companies out of business. It wants to expand the pie,” Susquehanna analyst Sam Poser told one outlet. Still, some see Nike availability at amazon.com as a new competitive threat to the likes of Kohl’s, Macy’s and Famous Footwear.
Goldman Sachs laid out the positives of a formal Nike-Amazon relationship and suggested the connection could motivate other wholesale brands to reconsider their engagement strategies with the online giant.
Nike is likely to weigh in on Amazon during its fourth quarter earnings’ call later this week. Credit Suisse, for one, is positive on Nike in FY18 for a number of reasons. Most notable: a rising number of brand endorsements outside of sports, new product innovations spearheaded by the Air VaporMax, the brand’s takeover of the NBA license July 1 and moderating competitive headwinds.
