Big Brands Are Cutting Ties With Amazon

IKEA has announced it is cutting ties with Amazon, a move that other brands like Nike, Birkenstock and PopSockets have also done recently. However, according to a report by CNBC, the move could backfire, as Amazon completely dominates the online shopping market, with 38 percent under its control.

The only companies that come close are eBay and Walmart, which both only control single-digit percentages of the market.

IKEA said it was leaving Amazon because the retail giant decided to discontinue a smart lighting program that began in 2018. Many of the companies' products are still available on Amazon through third-party sellers. IKEA said it is “keen on exploring new areas” to reach its customers.

However, not many companies have the logistical ability to compete with Amazon’s shipping heft.

“IKEA worked on a pilot project with Amazon in the U.S. for smart lighting in 2018. The project was a trial, and after it ended, it did not go live,” the company said. “We will continue to dialogue with different partners to test new ways to meet our customers now and in the future, whenever and wherever they want.”

IKEA has reportedly looked into developing its own marketplace that would work similar to Amazon’s, but hasn’t yet spoken publicly about it.

James Thomson, who is a former Amazon manager and now a partner at brand consultancy Buy Box Experts, said that because most brands are available on Amazon regardless of whether the brand wants to be a part of the site or not, the decision to leave could backfire on the brand.

“To say the brand has won by walking away, they haven’t won at all,” Thomson said. “Amazon has a massive security blanket called the third-party marketplace. Those products sell at huge volumes, they’re Prime eligible and most customers don’t know any better.”