What's going on?
According to various media reports, Nike has agreed to allow Amazon to sell its products directly – and investors are saying just do it! (tweet this)
What does this mean?
Nike has, obviously, partnered with third-party retailers throughout its history (like Foot Locker), but has, until now, refused to sell directly to Amazon. However, as the appeal of in-store shopping at places like Foot Locker has declined, selling its apparel online has become more important to Nike. The company is ramping up its own ecommerce efforts, but it appears to be targeting a broader audience via Amazon as well. Also, by selling directly to Amazon, Nike can exert more control over how its products are marketed on Amazon’s platform (currently, other retailers can sell Nike gear on Amazon indirectly).
Why should I care?
For markets: Nike’s investors embraced the news; Foot Locker’s stock, however, struggled.
Nike’s stock was up about 2% on Wednesday, following reports that the deal could occur. Investors presumably like the idea of Nike taking advantage of Amazon’s platform, particularly given that Nike’s sales have begun to decline amid an increasingly competitive sportswear industry. The stock prices of other third party retailers, like Foot Locker, sold off sharply (about 5%) as they likely face a loss of sales to Amazon.
The bigger picture: Technology is killing traditional middlemen.
The business of putting together sellers and buyers, in lots of industries, is being indelibly disrupted by technology. For example, stock and bond traders are being replaced by algorithmic trading in the same way that third-party retailers have been Amazonized. Businesses that sell other businesses’ stuff increasingly have to be among the technology leaders in their space in order to survive.