Nike Inc. is breaking up with Amazon.com Inc.
The athletic brand will stop selling its sneakers and apparel directly on Amazon's website, ending a pilot program that began in 2017.
The split comes amid an overhaul of Nike’s retail strategy. It also follows the hiring of ex-eBay chief executive officer John Donahoe as its next CEO -- a move that signaled the company is going even more aggressively after e-commerce sales, apparently without Amazon’s help.
"As part of Nike's focus on elevating consumer experiences through more direct, personal relationships, we have made the decision to complete our current pilot with Amazon Retail," the company said in a statement. "We will continue to invest in strong, distinctive partnerships for Nike with other retailers and platforms to seamlessly serve our consumers globally."
Some big brands shun Amazon's platform, where fakes flourish and unauthorized sellers undercut prices -- a recipe that diminishes the value of sought-after labels. The unraveling of the Nike arrangement threatens to reinforce retailers' unease. Under the pilot program, Nike acted as a wholesaler to Amazon, rather than just letting third-party merchants hawk its products on the site.
Amazon operates an online marketplace, essentially a digital mall where merchants can sell products. More than half of all goods sold on Amazon come from independent merchants who pay the Seattle-based company a commission on each sale. Amazon also operates as a traditional retailer, buying goods from wholesalers and selling them to customers.
Nike said it will continue to use Amazon's cloud-computing unit, Amazon Web Services, to power its apps and Nike.com services.
Amazon, through a spokesperson, declined to comment. The company has been preparing for the move, according to two people familiar with the matter. It has been recruiting third-party sellers with Nike products so that the merchandise is still widely available on the site, they said. Amazon has also been working to stem the flow of counterfeits on the site through various initiatives, including one project that lets brands put unique codes on their products to make it easier to identify fakes.
The question now is whether other Amazon partners follow Nike's lead. Few other brands possess the kind of muscle Nike has, so it may be harder for them to leave.
"Nike has enormous reach and its products are in demand, so it can afford to be selective about where its products are distributed because customers will come find Nike where it is offered," said Neil Saunders, an analyst at GlobalData Retail. "I don't think as many brands can be as selective as Nike."
For years, the only Nike products sold on Amazon were gray-market items -- and counterfeits -- sold by others. Nike had little control over how they were listed, what information about the product was available, and whether the products were even real.
That changed in 2017, when Nike joined Amazon’s brand registry program. Executives hoped the move would give them more control over Nike goods sold on the e-commerce site, more data on their customers, and added power to remove fake Nike listings. The news of the Amazon tie-up, which Nike executives called a “small pilot,” sent shoe-retailer stocks tumbling and left many wondering if other major Amazon holdouts would quickly follow.
But Nike reportedly struggled to control the Amazon marketplace. Third-party sellers whose listings were removed simply popped up under a different name. Plus, the official Nike products had fewer reviews, and therefore received worse positioning on the site.
Leaving Amazon won't necessarily solve Nike's problems, which represent a big brand struggling to adapt to selling products in the digital age, said James Thomson, a former Amazon employee who now helps brands sell products online through Buy Box Experts.
"Just because Nike walks away from Amazon doesn't mean its products walk away from Amazon and doesn't mean its brand problems disappear," Thomson said. "Even if every single Nike product isn't on Amazon, there will be enough of a selection that someone looking for Nike on Amazon will find something to buy."
In 2017, Nike did business with 30,000 retailers around the world. Elliott Hill, currently the company’s head of consumer and marketplace operations, told investors that year that Nike would focus its future efforts primarily on about 40 partners.
Reading between the lines, it appeared to want partners that gave its Nike brand separate space -- such as Nordstrom “Nordstrom x Nike” shop on its website -- and was less interested in retailers that just placed Nike alongside its smaller competitors.
Analysts said physical sporting-goods retailers would benefit from Nike’s departure from Amazon. The pilot program was an “overhang” to the stock valuation of Foot Locker. That’s now removed, Raymond James analyst Matthew McClintock wrote in a note. Michael Baker of Nomura Instinet called Nike’s decision a modest positive for Dick’s Sporting Goods.