Why Nike May Start Selling Directly on Amazon

Jun 21, 2017

Nike could be close to selling its athletic gear directly on Amazon.com's e-commerce site, a move that would further rattle brick-and-mortar retailers that have depended on big brands like Nike to drive sales.

On Wednesday, a research note issued by Goldman Sachs speculated Nike (nke) could soon prepare to sell the company's apparel and shoes on Amazon (amzn) in a bid to court younger shoppers who have increasingly turned to e-commerce shops for their shopping needs. The speculation led to some stock movement on Wall Street: legacy Nike wholesale partners like Foot Locker (fl) and Dick's Sporting Goods (dks) saw shares dip as much as 5%.

The potential relationship comes at an uncertain time for the world's largest athletic gear maker. Nike's sales growth has slowed in North America, a development Mark Parker, the company's CEO, attributes to consumers increasingly buying more online and make fewer trips to physical stores.

As traffic at Nike's key wholesale partners continues to slow (hundreds of department stores and specialty sports retailers are closing their doors, resulting in less square footage for Nike products), it is working to boost its direct-to-consumer channels. By the end of fiscal year 2020, the company's goal is for its own fleet of stores and shopping-enabled mobile apps to generate $16 billion in revenue.

Nike, which recently announced it would cut about 1,400 jobs globally, isn't the only athletic-gear company rethinking strategy. The decline of Sports Authority, which recently filed for bankruptcy, especially stung Under Armour (uaa). The company has since inked a deal with Kohl's (kss) to get more gear on store shelves. Meanwhile Lululemon Athletica (lulu) earlier this month announced it would close most of the company's tween-focused Ivivva stores.

Even as Nike invests into the company's stores and apps, billions of dollars of goods are being sold on Amazon. Apparel, in particular, has been an increasingly important focus for the e-commerce giant. A possible deal with Amazon points to the migration of consumer spending and why brands like Nike need to think differently if they want to continue to generate sales growth.

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