When Nike announced in 2017 that it would be selling footwear through Amazon, it was held up as a sign of the times in the retail industry. The e-commerce giant Amazon was a major player in sneaker sales and sports apparel.
But earlier this week, Nike announced that it would no longer sell its goods wholesale to Amazon ending its two-year partnership. But it might be just the “tip of the iceberg” of brands option to go directly to consumers, internet entrepreneur Tim Armstrong told CNBC on Friday.
“The direct-to-consumer movement will be the replacement for the retail issues and commerce issues that are going on because of the platforms,” says Armstrong, founder of the dtx company that aims to disrupt online shopping. “If they have the option to go direct they are going to go direct,” he added. Brands are always fearful of losing control of how they’re represented on the site after partnering with it.
Nike referred to the arrangement as “pilot” even though it was launched back in2017. Now the company will shift its focus to direct-to-direct business, which brings about 30% of its annual sales. In its last fiscal year, Nike’s generated direct-to-direct consumer sales of $11.8 billion. Direct-to-consumer is “another megatrend starting” according to Armstrong, whose company invests in brands selling directly to consumers.
While announcing the dtx company earlier this year, Armstrong said he sees the economy transferring away from a “one-way, wholesale distributor relationship,” thanks to technology around social media and payments in particular. Armstrong’s optimism towards the growing industry is in the same line with analysts who said this week they believe other retailers will follow suit after Nike’s announcement.
“The move shows us that strong brands realize that strong brands realize that traffic driven to their site (such as Nike) is self-sustaining, more profitable, and brand-enhancing, while traffic and incremental revenue from Amazon.com is less profitable but also less brand-enhancing,” says Jefferies analyst Randy Konik.
Amazon is yet to give a comment on the announcement.
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