Nike's (NKE +1.67%) marriage to Amazon.com (AMZN +0.84%) just wasn't made to last.
The sneaker and clothing titan is ending the pilot test it began with the e-commerce giant in 2017. Back then, Nike wanted Amazon to do a better job of removing counterfeits and halting unlicensed sales of its products on its website. In return, Nike agreed to sell a limited assortment of its apparel on Amazon.com.
Now Nike wants to focus more on its direct-to-consumer (DTC) efforts, which include its Nike.com website. The company's Nike Direct segment is one of the fastest-growing parts of its business. In fiscal 2019, Nike Direct revenue jumped 16% on a currency-neutral basis, to $11.8 billion, driven by a 35% surge in e-commerce sales. By comparison, Nike's wholesale business -- which includes sales to retailers such as Dick's Sporting Goods and Foot Locker -- saw revenue rise 10% on a currency-neutral basis.
Nike wants to go its own way in the online arena. Image source: Nike.
Nike's DTC business accounts for approximately 30% of its overall revenue. This figure is only likely to rise in the years ahead, as consumers continue to shift their retail purchases to online channels. While partnering with Amazon could help to boost its online sales, Nike wants to maintain greater control of how its brand is marketed online as well as its e-commerce interactions with customers. Thus, by ending its sales agreement with Amazon, Nike can focus more on strengthening its Nike.com business.
"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," Nike told Bloomberg.
Nike noted that it plans to continue its relationship with Amazon Web Services, which powers its website and mobile applications. It also left open the possibility of deals with other e-commerce sites.
"We will continue to invest in strong, distinctive partnerships for Nike with other retailers and platforms to seamlessly serve our consumers globally," the company said.
New leadership
The move follows Nike's announcement that outgoing CEO Mark Parker will be replaced by John Donahoe in 2020. Donahoe previously served as CEO of e-commerce giant eBay, and it's widely believed that Nike's board has tasked him with furthering the company's online ambitions.
"I am delighted John will join our team," Parker said. "His expertise in digital commerce, technology, global strategy, and leadership combined with his strong relationship with the brand, make him ideally suited to accelerate our digital transformation."
Donahoe apparently believes that the best way for Nike to advance its digital strategy is to break free from Amazon and forge its own path in the online world. Is it the correct course of action? Time will tell.
