The pilot program of Nike to trade specific goods on Instagram and Amazon is a predecessor to the company forming a closer relationship with online vendors that might strike sales of vendors such as Foot Locker Inc. Last week, the deal, which is anticipated to assist Nike Inc. get rid of counterfeit goods traded via unlicensed vendors online and offer it more power on its distribution, raised the shares of the company as compared to the last 3 months.
The company’s decision confirmed a report from Goldman Sachs that claimed the firm would roll out its goods on the largest online retailer of the world. Since then, stakes of sporting products retailer have dropped—Foot Locker Inc. by almost 2%, Big 5 Sporting Goods Inc. by 5.3%, and Hibbett Sports Inc. by 6.8%.
“They’re all messing up presently,” Chief Marketing Officer of a well-known market research company, Judge Graham, claimed to the media. The move of Nike taking into consideration to sell straightly to the user and that too with Amazon makes the situation more nervous.
Sporting products retailers, which depend on Nike for a considerable fraction of their wholesale income, would be stroked further in case the partnership of Nike with Amazon grows beyond the present pilot program. The sporting products market is already in great problem, with various retailers including as Sports Authority already registering for economic failure, and Nike’s contract might push current vendors to shut down more stores, experts claimed.
Nike, whose goods are already traded on Amazon via unlicensed and third party dealers, might build an extra $300 Million to $500 Million of income in the U.S. or 1% of its international sales via its extension as a dealer on Amazon. However, Nike still relies on the wholesale branch for 2/3rd of its income and will be careful about making any radical move of selling straightly on Amazon, claimed analyst at Quo Vadis Capital Inc., John Zolidis.
Having said this, it is expected that Nike may unload more of its non-premium goods in order to maintain the balance. Let us see as to what the time will bring for sporting products vendors.