Nike’s chance to do business on Amazon’s online marketplace could generate massive revenue boosts, Jennifer Sabas writes in Breakingviews.
Nike may be getting back on track. The $96 billion sportswear maker confirmed it will sell its sneakers and the like on Amazon after years on the sidelines. Though still the dominant athletic brand, it has been losing ground especially to Adidas. Coupled with its own direct-to-consumer push, the new initiative could make it a pacesetter again.
The company, led by Mark Parker, reported better-than-expected quarterly revenue and profit on Thursday and finally said it was launching a pilot program with the e-commerce titan, in line with earlier press reports. He was coy about what products would be part of the launch, but investors nevertheless sent Nike shares up more than 8 percent on Friday.
Shoppers can already buy Nike products with the company’s swoosh logo on Amazon, but they’re offered through unlicensed sellers that Nike can’t control. Doing its own business on Jeff Bezos ‘ online mall could generate up to $500 million of additional revenue, Goldman Sachs estimates.
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The move plays nicely with Nike’s ambitions to do more business directly with consumers. Third-party retailers provided nearly two-thirds of the company’s top line in the past year. But as the headlines grow dire for brick and mortar outlets — think Sports Authority’s bankruptcy, for example — that number will shrink. Nike’s own website sales aren’t likely to plug the gap.
The company still has hurdles to clear. Sales in North America, the source of nearly half of its revenue, were flat for the quarter. It’s also late to the game in respect to Amazon. Rivals Adidas and Under Armour have already been selling their wares there.
The German maker of Stan Smiths increased its market share of footwear sales in the United States to 11 percent in May from 6 percent a year earlier, according to retail research firm NPD Group. Although much larger, Nike lost a point of market share, to just under 35 percent. Gross margins also declined as the company works through price hikes and increased product costs.
Overall though, the Beaverton, Oregon outfit is getting its game face back on.
Commentary by Jennifer Saba, a columnist at Breakingviews. Follow her on Twitter @jennifersaba.
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