AMZN stock is in the red on Wednesday after Nike Inc (NYSE:NKE) said it would stop selling its products directly to Amazon (NASDAQ:AMZN).
Nike Ends Two-Year Pilot Program
The sportswear giant has said that it is ending a two-year pilot program that saw it sell its merchandise through Amazon in an effort to focus on its own direct-to-consumer operations. The partnership was initially announced in 2017 in an effort to reduce the number of third-party and counterfeit sales but has now been terminated, with Nike citing a lack of direct involvement with the program as a factor. AMZN shares are down 1.4% following Nike’s withdrawal, while NKE stock is up 1.8%.
The decision comes less than a month after Nike appointed former eBay (NASDAQ:EBAY) chief John Donahoe as its new CEO after the departure of Kevin Parker.
Analysts are saying that Nike’s decision to cut ties with Amazon is setting off alarm bells in the retail industry, arguing that it could open the door for other companies to follow suit, which could have negative implications for AMZN shares. “Brands don’t need Amazon,” Jefferies analyst Randy Konik said. “Amazon had a delivery speed advantage, but that advantage has compressed. With Nike leaving the Amazon platform … it strengthens our view that retailers/brands won’t be displaced by Amazon.”
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Amazon has been trying to push into the fashion space by collaborating with brands such as Nike, Calvin Klein, and J. Crew, but users have found the e-commerce site clunky and difficult to navigate when it comes to searching for clothes, as well as issues with differentiating between official and third-party retailers. Konik also pointed out that brands are coming to realize that traffic driven to their own sites is “self-sustaining, more profitable, and actually brand-enhancing, while traffic and incremental revenue from Amazon.com is less profitable.”
AMZN shares are currently trading at $1,753.11 USD.
Featured Image: DepositPhotos © wolterke
