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Does Nike Move Show An Amazon Weak Spot?

The knives are out for Amazon this week thanks to a major sneaker brand. But at this point, it seems unlikely that major changes are in store for the eCommerce operator.

Here’s the scoop, in case you missed it: Nike announced that it is parting ways with Amazon and will no longer sell its products on the eCommerce marketplace, ending a pilot program that began in 2017. The sneaker and sports apparel company said it is going forge new retail partnerships and concentrate on its direct business.

For many years, Nike opted out of an Amazon partnership due to concerns that it would weaken the brand. It was also upset about the many unauthorized sellers on Amazon, sources told The Wall Street Journal.

“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 to Bloomberg. “We will continue to invest in strong, distinctive partnerships for Nike with other retailers and platforms to seamlessly serve our consumers globally.”

The Nike move could lead other brands to reconsider their relationships with Amazon, Jefferies analyst Randy Konik told CNBC. “Brands don’t need Amazon,” he said. “Amazon had a delivery speed advantage, but that advantage has compressed. With Nike leaving then Amazon platform … it strengthens our view that retailers/brands won’t be displaced by Amazon.”

Amazon Subscription Play

Even so, Amazon’s advantages remain significant, even in the wake of this Nike move, as fresh PYMNTS research confirms. After all, Amazon is the one to beat for online retailing — and this also holds true for subscription commerce.

More consumers turn to Amazon for retail product subscriptions than any other type of subscription product service, with 45.5 percent of survey respondents indicating they do so. This share is larger than the combined portion of consumers who subscribe to any single other product category, including the 42.9 percent of shaving products subscribers, the 35.7 percent who subscribe to pet products and the 32 percent who do so for beauty products.

That said, it’s not exactly fair to compare Amazon with its Amazon Prime offering that encompasses free shipping, music streaming and other perks to companies like Harry’s, Birchbox or Rent the Runway that focus on narrower product categories.

The survey reflects these differences between utilitarian services vs. product discovery, as the majority of Amazon subscribers (54.1 percent) subscribe for replenishment. So do 84.3 percent of shaving service subscribers. Beauty products and clothing are the reverse, with 90.1 percent of beauty subscribers doing so for “box-of-the-month” items and 76.2 percent of clothing subscribers doing so for the same reason.

Logistics Complaint

The Nike move is not the only recent trouble Amazon is facing.

An online merchant has written a letter to Congress saying the company was forced to use Amazon’s logistics services, as it otherwise would have faced stiff penalties and possible suspension from the site. These moves made it necessary for the merchant to raise prices for its customers, according to a report by Bloomberg.

The 62-page letter talks about how Amazon is harming consumers, which is the general groundwork for an antitrust case. The letter accuses Amazon of tying in its logistics service with its marketplace, which would constitute an antitrust violation because a company can’t use its heft in one market to give itself an advantage in another. Amazon controls about 70 percent of all online marketplace sales in the U.S.

“When it comes to Amazon’s dealings with third-party merchants, some of the conduct actually does lend itself to antitrust scrutiny,” said Hal Singer, an antitrust expert and Georgetown University adjunct professor retained by the merchant. “If you can connect the conduct to some measurable harm, in this case increased prices, that gets you into the antitrust ballpark.”

Amazon denied the accusations and said it does not penalize merchants for using other delivery options.

“Amazon has invested tens of billions of dollars in developing a world-class fulfillment network, and we offer that network to sellers at highly competitive fees when compared to other options available to sellers,” Amazon said. “In fact, our research shows other comparable options available to sellers are approximately 50 to 80 percent more expensive.”

It remains unclear what, if any, impact the Nike move and this logistics complaint will have on Amazon, but it doesn’t seem likely now that they pose any major threat.

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