Earlier this week, Nike announced it will no longer sell its wares on Amazon, instead opting to follow a growing trend in eCommerce where companies sell directly to consumers (DTC).
On Friday (Nov. 15), internet entrepreneur Tim Armstrong said Nike’s move was the “tip of the iceberg,” and that an increasing number of companies will opt to ditch Amazon and sell their products themselves, according to a report by CNBC.
“The direct-to-consumer movement will be the replacement for the retail issues and commerce issues that are going on because of the platforms,” said Armstrong, who founded a DTC company with the aim of changing how people shop online.
Armstrong is the former CEO of AOL and used to run Google ads. He said many brands don’t want to team up with Amazon because they’re worried they won’t have control of how they will be positioned on the site.
“If they have the option to go direct, they are going to go direct,” he said, referring to DTC as “another megatrend starting.”
Nike launched a limited program to sell with Amazon in 2017, but the company confirmed the program will end. Nike will now focus on its DTC business, which it said pulls in about 30 percent of its yearly sales, totaling about $11.8 billion.
Armstrong appeared on CNBC to announce a shopping event called DTC Friday, which “celebrates and empowers the DTC movement by connecting shoppers with direct-to-consumer brands and with their favorite charities.”
Because of new technologies surrounding payments and social media, Armstrong predicts a fundamental shift in the economy, one that will move away from a “one-way, wholesale distributor relationship.”
Armstrong, along with other analysts, believes that many brands will follow Nike’s lead.
“The move shows us that strong brands realize that traffic driven to their own site (e.g. Nike.com) is self-sustaining, more profitable and actually brand-enhancing, while traffic and incremental revenue from Amazon.com is less profitable but also less brand-enhancing,” said Jefferies Analyst Randy Konik.