Why Nike and Birkenstock Are Cautionary Tales for Brands on Amazon

By Buy Box Experts on July 10, 2018

Amazon is dependent on brands to ensure that it can offer a large selection of products to its own customers. Yet Amazon’s relationships with brands have been complicated by its constant efforts to lower prices, and its unwillingness to develop a long-term solution to unauthorized sales of products by third-party sellers.

Nike: The Swoosh That Could

(popular brands sold on Amazon graphic from Wall Street Journal)

In July 2017, Nike announced that it would be partnering with Amazon to sell items directly to customers. At that time, the only Amazon property through which Nike was sold was the subsidiary Zappos.com.

According to Bloomberg, Nike would be selling its products via Amazon’s Brand Registry, which is used to protect brands from counterfeit Amazon sales. According to Digiday, Amazon’s brand registry allows brands to “control their messaging, handle customer feedback, and get valuable information like what variations people are picking, what else they are searching for,” and more.

While Brand Registry simplifies the process for brands to get counterfeits removed from Amazon, the program does very little to address the rampant problems Nike has had on the Amazon channel with unauthorized third-party sellers. So Amazon took the unusual action of helping remove some of those unauthorized sellers on Nike’s behalf.

Even with Amazon’s removal of certain third-party sellers, Nike’s third-party sales have suffered, and its first-party sales have not helped much. Nike initially tried to ensure that it was the only seller of Nike-branded products on Amazon, but soon realized that trying to minimize third-party sales is akin to game of whack-a-mole. As soon as product offers from some third-party sellers were removed by Amazon, new offers of identical products would pop up under other other seller names.

“Amazon is notorious for not being a very helpful partner for a lot of brands, and if there’s any brand you would think would have leverage, it would be Nike,” said Jim Fosina, CEO of Fosina Marketing Group, in an interview with Digiday last December. “So if you look at Nike and see that [Amazon] haven’t been the best partner — allowing third-party distributors to be the Amazon Choice product and undercutting Nike’s first-party distribution — it’s telling luxury brands that maybe Amazon isn’t the right platform for them.”

Nike’s quest to weed out third-party sellers has inadvertently created a situation that sees the brand competing against itself. The specific products offered by Nike through its first-party relationship with Amazon have shorter history and fewer reviews, and will accordingly be featured in worse positions than products sold by third-party sellers. Brands have to realize that they either need official third-party sellers on Amazon, or have to ensure that their listings contain high-quality product data and lots of reviews, if they want to sell wholesale to Amazon.

The Curious Case of Birkenstock

To say that Birkenstock has had an eventful last two years on Amazon would be an understatement.

Frustrated by knockoffs and unauthorized sellers on the platform, Birkenstock declared in a letter to several thousand retail partners on July 5, 2016, that it would no longer supply its products to Amazon in the US starting on Jan 1, 2017.

But that has not stopped counterfeit sandals from proliferating on the site. Since pulling its products, Birkenstock has accused Amazon of not doing enough to remove fake replica Birkenstock products from their platforms. Speaking to the Telegraph in late 2017, Birkenstock CEO Oliver Reichert accused Amazon of acting in lockstep with the counterfeit sellers. Said Reichert, “The truth is that Amazon makes money with these fakes. As far we’re concerned, Amazon is an accomplice.”

At the time of writing this post, Amazon.com still features Birkenstock products, even though Birkenstock still doesn’t authorize third-party merchants to sell on the site.

Across the Atlantic, Birkenstock announced that it would be terminating its business relations with Amazon’s European website on January 1, 2018, because of what it called “a series of violations of the law on the Marketplace platform,” as well as suggestions that Amazon EU “did not do everything within its power” to prevent counterfeit items from being sold on the platform. At the time of writing this post, Amazon.co.uk still features Birkenstock products.

Why would these products still be on Amazon in the US or UK? It is interesting to note that in both countries, the seller of this product is not identified as normally seen on Amazon product pages.

In addition, on December 30, 2017, a German court provided Birkenstock with an injunction to stop Amazon from using misspelled versions of Birkenstock in their online marketing campaigns. The ecommerce giant was ordered to halt a practice of running Google ads to draw shoppers to search results for shoes sold on Amazon.com using common Birkenstock misspellings like “Brikenstock,” “Bierkenstock,” and “Birkenstok.”

The case highlighted an example of how Amazon has capitalized on its dominant position in organic search engine results, by driving customers who are looking for a brand not sold on Amazon to pages on Amazon’s site that feature the brand but contain no products. Amazon can then use this customer intent as evidence that customers are looking for that brand’s products on Amazon, which can serve as a negotiation tool with said brand.

According to Fortune, the German Birkenstock case “could have broader implications for a longstanding, and usually benign practice in online advertising.”

What Should Brands Do to Leverage the Amazon Channel Properly?

Brands must have a clear strategy before they start selling on Amazon: are they going to partner with Amazon to sell directly to customers, or are they going to use authorized third parties to ensure control over their branding?

If a brand decides to remove its products from Amazon, then active management of its content remains important, including ensuring that this content is no longer found on Amazon’s sites. That Birkenstock products are still available on Amazon puts Birkenstock in a bad position if it seeks to re-enter negotiations with Amazon. Brands also need to ensure that they are aware of misspellings, including misspelled domain names, that can redirect customers to websites they don’t control.

In both cases, the argument can be made that Nike and Birkenstock should have hired an agency that has significant Amazon insight before starting their relationships with Amazon. Understanding the nuances and intricacies is vital to ensure that your brand is found on Amazon, and is being managed properly.

Buy Box Experts
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