Nike’s reported partnership with Amazon has both economic and anti-counterfeiting implications 28 Jun 17
It has been reported that Nike is preparing to sell products directly through Amazon.com for the first time, utilising the latter’s new brand registry offering. As well as representing a potential commercial win for both companies, the move could highlight the benefits of the e-commerce giant’s new programme for brands fighting the spectre of counterfeit goods on the platform.
The partnership between Nike and Amazon is, at this stage, unconfirmed. Nonetheless, over the past week it has been generating coverage in the financial press after Goldman Sachs analyst Lindsay Mann revealed the likelihood of a team-up, noting that “taking this step would give Nike direct economic exposure to a large and fast growing distribution channel, while improving the brand presentation and expanding access to millennial shoppers”. This step would be to sign up to Amazon’s brand registry programme. At present, while Nike does business through Amazon’s online shoe and clothing subsidiary zappos.com, it does not make product available via Amazon.com. By changing tact and signing up to the programme, Nike would be able to better control its positioning on the platform. For instance, Seller Lift reports that the system allows companies to whitelist approved sellers in order to allow authorised Amazon sellers to sell their products. This would allow tighter oversight of the sales channel, empowering official sellers. Mann’s comments, which sparked speculation that the company could build an additional $300 million to $500 million of revenue in the US, therefore had an immediate impact in the financial markets – Nike’s shares jumped 2%, while the stock price of a number of shoe retailers took a hit.
However, as well as representing a route to increased sales, the programme also enables action to be taken against unauthorised sellers and, crucially, those misusing the brand or selling infringing products. While Nike has, of course, always been able to lodge complaints against infringing goods, the benefits of the brand registry offering bolsters its position. In March we reported on the confirmation that the e-commerce giant was expanding its anti-counterfeiting programme to allow rights holders to register their logos and intellectual property to expedite the removal of counterfeit listings. The company’s Brand Registry 2.0 programme subsequently went live, enabling sellers to report Amazon policy violations and, crucially, to reportedly see action on complaints within hours (to qualify for the programme, brands have to provide details of a registered trademark).
The move, then, appears to represent a ‘win win’ situation for both Nike and Amazon. The sportswear company can better control a new distribution channel (and lodge more effective complaints against infringing or unauthorised sellers). Meanwhile, given Nike’s absence on the platform to date, its involvement would serve as a high profile endorsement of the platform’s brand tools and comes at a time when Amazon is focused on bolstering its anti-counterfeiting credentials.
For Nike, one suspects the prime motivation is sales-related rather than to fight illicit and unauthorised sales, but the two are intrinsically related. As well as the removal of fake product creating an opportunity to increase genuine sales, the prevalence of counterfeits in the market can also directly impact investor sentiment.
On this, despite the initial spike in Nike’s stock price when the news of its potential new Amazon strategy, an editorial on investment research platform Seeking Alpha this week opined that companies creating products vulnerable to rampant piracy are not a safe long-term investment. Focusing specifically on Nike, it strikes a pessimistic tone, arguing that – as a powerhouse and popular sportswear brand – Nike will not be able to “neutralize this long-term [counterfeiting] headwind”. It adds that, even if fakes are eradicated from Amazon, other online and offline markets will continue to peddle counterfeits. It adds: “When you think about it, Nike's $3.2 billion advertising budget actually also helps promote and sell more counterfeit Nike products.”
That may be true but companies like Nike have no choice than to flex their marketing muscle in a competitive market. After all, reducing ad spend in a bid to lower profile and, as a result, attractiveness to infringers is not a valid commercial strategy for any company. Depressingly, counterfeiting is the price of success and for any organisation, the key is to continue efforts to combat it.
For Nike’s trademark professionals, then, it is all about doing everything it can to continue fighting the good fight and tackling illicit trade in all its guises, enabling the business to then reap the benefits of a cleaner marketplace. Positively for the sportswear company, it boasts a strong bench in this regards, and the trademark department was named the Sports, Entertainment & Media Team of the Year at the 2017 WTR Industry Awards.
Of course, the prevalence of counterfeit goods in the market is just one factor in the ‘buy/sell’ stock decision-making process and there are two sides to the coin. On one, the prevalence of counterfeits could be seen as a factor dampening investor attractiveness. The flipside, though, is that effective efforts to combat counterfeiting and deliver genuine product to consumers can have a positive impact on stock price. Hence, Nike’s 2% bump when the potential partnership with Amazon.com was announced – the spike in part attributable to the prospect of replacing unauthorised sales with genuine on the ecommerce platform, and tightening control of this key sales channel. An effective anti-counterfeiting programme, spearheaded by a proactive team, can clearly make a significant contribution to economic performance.
It remains to be seen how far the utilisation of Amazon’s brand registry offering helps in this regard but it will no doubt be closely watched by market analysts – as well as other brands keen to assess the merits of the programme.
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