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When customers see the Nike Swoosh, they instantly think of excellence. This reputation spans their entire product range. However, non-core products like yoga mats or exercise balls rarely reach high sales velocity on Amazon, despite the brand’s quality and reputation.
In the following sections, we’ll break down what an ideal product, license, and marketplace fit could look like for Nike and we’ll provide actionable insights for established brands looking to ramp up their Amazon strategies. If you represent such a brand and wish to discuss collaboration, please get in touch.
Nike's Amazon Potential: Non-Core High Demand Products: We're bypassing Nike's core items like apparel and footwear, instead, our focus is on areas where Nike can either expand in-house or license production to specialized manufacturers. Products like dumbbells, massage guns, and stretch or resistance bands.
An Amazon search for these products rarely brings up a recognisable brand name: DEHUB, WSAKOUE, RENRANRING, AERLANG & TOLOCO; these and similar unknown, predominantly Chinese brands dominate Nike across all of their current non-core product range.
Adjustable Dumbbells, Ice Packs, and a Theragun Killer: Nike Ice Packs, Nike Adjustable Dumbbells, Nike Massage Rollers, and a Nike alternative to Theragun. Just these four products could generate over $300 million in U.S. revenue alone. For context, the combined Amazon revenue for Nike's existing range of these products is under $500k.
When there's a strong product-brand fit and a licensee capable of delivering quality products, huge volumes await on Amazon. So why doesn't a brand like Nike dominate this space?
These Chinese brands have mastered the art of selling on Amazon; they understand the searcher intent and exploit every marketing opportunity in the Amazon ecosystem. Though this can all be replicated – what they cannot replicate is the brand equity that established brands have. We’ll continue with a Nike specific example; for more information applicable to all brands check out our article on the Untapped Competitive Advantage.
June 2023
In conventional sales channels, Nike often manufactures products in-house or licenses the production to specialized third parties. These products then traverse a distribution chain, moving from manufacturer to distributor, then to retailer, and ultimately to the end user.
In conventional sales channels, Nike often manufactures products in-house or licenses the production to specialized third parties. These products then traverse a distribution chain, moving from manufacturer to distributor, then to retailer, and ultimately to the end user.
In conventional sales channels, Nike often manufactures products in-house or licenses the production to specialized third parties. These products then traverse a distribution chain, moving from manufacturer to distributor, then to retailer, and ultimately to the end user.
In conventional sales channels, Nike often manufactures products in-house or licenses the production to specialized third parties. These products then traverse a distribution chain, moving from manufacturer to distributor, then to retailer, and ultimately to the end user.
In conventional sales channels, Nike often manufactures products in-house or licenses the production to specialized third parties. These products then traverse a distribution chain, moving from manufacturer to distributor, then to retailer, and ultimately to the end user.
While Nike sometimes bypasses intermediaries by selling directly to Amazon, more often it’s either a distributor or a retailer that uses Amazon as an overflow sales channel. Each entity in this chain takes a share of the profits. By the time the product lands on Amazon, and Amazon takes its own sizable cut, the remaining margins are too slim to support a competitive retail price.
This narrow profit margin discourages Amazon sellers from investing in essential areas like advertising and high-quality listings. The current distribution model leaves Nike missing out on Amazon’s full market potential.
This issue is avoidable. For Amazon to be a lucrative channel for Nike, a rethink is needed from the get-go. Amazon should be considered an essential part of the strategy from the outset, not just another outlet for distributors.
Amazon sellers face multiple costs: stock risk, pay-per-click (PPC) advertising, referral and fulfillment fees, and content creation. All these expenses eat into the already slim margin, discouraging investment.
The outcome? Even though Nike is a strong brand, it is outperformed on Amazon by lesser-known brands like ‘Gonii’ and ‘Aenelly,’ often by a 10-to-1 margin. The listings below provide a snapshot of why this is the case.
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The answer to these challenges is straightforward: Nike should consider direct-to-Amazon licenses with specialized manufacturers. By bypassing the traditional distribution channels, these licensees can produce high-quality products that compete effectively on Amazon. This setup enables enough margin for sellers to invest in top-notch listings and promotional campaigns.
Nike can exploit its brand equity to enter highly competitive niches at compelling price points, something the current model doesn’t allow for. The new approach not only enables competitive pricing but also ensures the product listings meet the high standards that customers expect from Nike.
Consider the fictional search results below; as an Amazon shopper which of these results are most appealing to you?
In this proposed model, the licensee takes on the stock risk and the costs associated with Amazon’s platform, like Pay-Per-Click (PPC) advertising, referral and fulfillment fees, and content generation. These expenses, while significant, are offset by the better margins gained through direct selling.
The benefits don’t end there. Nike retains the option to license out the retail aspects using the creative and product designs developed by the licensee. Furthermore, Nike can still leverage these assets globally, allowing for more efficient licensing deals worldwide, as the product development is already complete.
By implementing this direct-to-Amazon strategy, Nike not only expands its potential in the US and EU markets but also enhances its appeal for global licenses. In a nutshell, this strategic shift could be a game-changer for Nike, fully leveraging Amazon as a platform for both sales and brand enhancement.
Selling a Nike-branded product on Amazon offers several financial advantages, including less price sensitive customers, better conversion rates, and reduced advertising costs – the power of the Nike brand drives more clicks and conversions, effectively lowering the cost of advertising.
Consider the image of the Nike Ice Pack below. When pitted against non-branded options, the Nike brand naturally commands attention and clicks.
While it’s hard to speculate what Nike considers a meaningful revenue increase, the prospect of gaining an additional £50m net of royalty income shouldn’t be dismissed lightly.
The increase in net revenue, paired with greater brand visibility and improved creative content, offers a multifaceted win for both the licensee and Nike.
We can only hope that this strategy catches the attention of decision-makers at Nike. The proposed direct-to-Amazon licensing model is a win-win, offering real benefits for both Nike and its potential licensees.
So here’s to dreaming big and hoping someone at Nike hears us one day and gets in touch!
