Why Ikea and Nike have walked away from Amazon
When major global brands like Ikea and Nike announce they are exiting a major global platform like Amazon, it is clear that a strategic shift is in the making
What used to be a primary go-to-market strategy of brands by latching onto Amazon’s success seemed to have chipped away over the years: Amazon is now losing the grip on its throne and is no longer the “cool kid” everyone wants to play with.
Welcome to the generation of the ‘hip indies’ where being “self-partnered”, transparent and ethical is the new status symbol – describing both the millennials and Gen Z groups, and the archetype of direct-to-consumer brands.
Nike competes with itself
Last month, Nike ceased its pilot partnership with Amazon after a two-year-long gig launched as a means to eject unlicensed distributors and knock-off items from the site. In a statement, Nike announced: “As part of our focus on elevating consumer experiences through more direct, personal relationships, we have made the decision to complete our current pilot with Amazon Retail”. The sportswear label sold a limited range on the marketplace however the control of the grey market it had hoped to regain never materialised. No did the strategy align with expectations.
While Nike struggled to compete with counterfeits on Amazon, the sneaker giant will continue to sell through other third-parties. Globally it is narrowing the number of retail partners it works with in favour of going direct to consumer using flagships and its own online sites.
Ikea packs up
In lesser-known and surprising news, just after Nike’s announcement, Swedish furniture and homewares giant Ikea followed suit in quitting Amazon US. The company had been selling a range of smaller products on the platform, taking advantage of Amazon’s speedy deliveries.
However since the hiring of its new chief digital officer Barbara Coppola last year, the brand decided to revert back to direct selling without the aid of the marketplace. No explicit reasons as to why were released.
Where Amazon fails, Tmall gains
The benefits of pairing with a marketplace are obvious, quite aside from the reach and operational efficiencies such as Amazon’s infamous last-mile deliveries. In this case, analysts are split 50-50 on the decisions by Ikea and Nike to ditch Amazon. Some say the divorce will cause the brands to lose some of their market presence – perhaps to their competitors – while others are advocates of the new direct-to-consumer wave.
However, the bigger issue lies with Amazon’s mundane marketplace and the lack of brand curation, in contrast to how Alibaba’s Tmall has been banking on international brands’ market entry into China.
Nike’s featured page on the Chinese marketplace allows it to brand its page similarly to its own website, thus keeping its brand image intact – as opposed to the lacklustre stock images on Amazon. Nike has reaped success on Tmall, especially as being one of the top-selling fashion brands highlighted in this year’s Singles Day event.
When Alibaba launched Tmall’s Luxury Pavillion, it allowed luxury brands such as Givenchy, Versace, Burberry and a string of others to entrust the marketplace with establishing its presence online – some, long before they had established their own direct e-commerce channels.
Despite the historic association of China with fake goods – and on top of some long legal battles involving leading fashion conglomerates – Alibaba rebuilt its status by eradicating all counterfeits to quickly tap into the Chinese high net worth individuals with all the benefits of being the e-commerce giant in town.
Being the David to the Goliath
Riding on the glorified success of brands like Warby Parker and Glossier, direct-to-consumer brands are hawked over by venture capitalists looking for a stake in ‘the next Unicorn’. The accomplishment of such brands has stemmed from their ability to truly capture the hearts of digital-savvy millennials and Gen Zers using authentic branding and cutting out the middlemen and corporate giants.
These days, consumers are not necessarily looking to find the best price (money conscious as they may be), rather they are looking to adorn themselves with brands that share the same values and beliefs.
Ikea x Off-White collaboration
Nike is a brand with a long-established and strong reputation for athleticism and its street game. However, in today’s cutthroat market where consumers side with which influencer wore what, brands need to reinforce their imagery, not only through their marketing, but also through their retail environment, whether that be experiential flagship stores or online channels.
Ikea, for example, is looking to maintain an image as a trusted homewares brand – especially among the rising young millennial household-owner and new parent market segments. Ikea is achieving this by partnering with contemporary brands such as Hay and Off-White.
The type of shoppers going to Amazon are no longer the type of core customers brands like Ikea and Nike are looking to reach. Therefore it makes sense such brands are choosing to take their own paths – paths they can control themselves.