April 2021 | by Lili
Nike decided to stop supplying several hundred of its EU distributors with its products. The sportswear giant sent a letter informing the affected distribution partners that the spring season of 2021 will be the last one of them working together as Nike terminates their contracts as of 31 March 2021.
The company claims it came to this decision because the distributors’ business strategies didn’t match theirs any more. However, the letter doesn’t elaborate which elements of the distribution resellers’ strategy aren’t satisfactory any more, nor does it give any encouragement to distributors to change their strategy to remain a business partner of Nike.
As you may remember, this isn’t the first time Nike terminates an important distribution partnership. In fact, it may not even be the biggest one: back in 2019, Nike announced it will stop allowing its products to be sold on Amazon. Talk about a big step.
The American sports giant (that, together with Adidas, is often accused of dominating the global sportswear market) has a patchy history in the EU. In 2019, the company was fined 12.5 million for hindering cross-border sales within EU countries.
Nike has been contemplating its current decision of terminating its business relationship with independent EU distributors for several years now. The company announced back in 2017 that it will reduce the number of its distributors in order to form a more direct relationship with consumers.
This move comes as part of a new branding strategy. Over the last few years, Nike enhanced its social media presence, stepped up its sponsorship game, and even launched a fitness app, Nike Training Club. As a part of this strategy, it seems that Nike wants to have a larger control over who distributes its products and how to reach its consumers.
As a brand, Nike has the right to decide who and how should be allowed to represent it to consumers. But does this action violate EU antitrust laws?
At this point, that’s unclear. According to a 2017 judgement, the Court of Justice of the European Union allows luxury brands to restrict distributors on how and where they can sell the brand’s products in order to protect their image. But how Nike’s current decision will ultimately impact the free flow of goods across the EU remains to be seen.
When asked about the situation, the German Federal Cartel Office stated that the issue wasn’t on its current agenda. However, this may change if distributors decide to challenge Nike in a court of law. We’ll continue to monitor the situation and report on any new events on our blog.
As Nike’s case shows, the distribution of branded products online and worldwide is a serious task that brands have to retain control over. Even a giant like Nike’s brand could be hurt if its distribution partners don’t follow the previously agreed guidelines. Choosing the right strategy and creating a reliable distribution network is a big task.
We at globaleyez have seen many times how much damage a brand can suffer because of non-compliant distribution partners. Beside the significant loss of revenue comes an even bigger problem: the loss of reputation. Which, especially for a luxury brand, is hard to measure in exact numbers, yet very much felt by the brand.
As our Managing Director, Oliver puts it:
“If you are running a partnership, then it should be natural that both partners share the same values and understanding of the agreements. However, in many cases it is unfortunately not the case. To keep your partners compliant is key, to keep the image and assets of your brand vital. Some partners may be only interested in short term success while you as the brand owner are interested in a long-term successful development of your work. Keep your partner compliance in sight and spot the black sheep for the sake of all partners.”
This is why we decided to extend our services to include partner compliance. As online brand protection experts, we have realized time and time again how difficult it can be for brands to keep track of their distribution networks. Especially with E-Commerce and global trade, brands can’t be expected to closely follow what exactly is happening in remote online marketplaces.
But globaleyez can do it for you. We can check how your distribution partners act in their respective marketplaces, and whether they comply with the rules set by you. How?
We conduct test purchases in over 50 countries, covering both online marketplaces and brick-and-mortar stores. Our mystery shopping service includes visits to the site and interviews with your distributors, without them knowing that we’re acting on your behalf.
On your request, we can provide you with detailed background reports on the actions of your distributors, including sales volume and in-depth research into the whole distribution network.
As evidenced by our valued clients, our test purchases have uncovered counterfeit products, grey marketers, broken partner agreements, and much more.
"Partner compliance is a lot more than a simple contract. Distributors have to create the perfect environment for a brand and its values, making sure that they represent the brand as if it was their own. It’s a constant strive for excellence on both sides."
Test purchases and mystery shopping are the best way to see your distribution partners in action. Since they assume they’re selling to regular customers, they’ll act as they usually do when representing your brand. This way, our report uncovers if your distribution partners hold themselves to their side of the agreement.
In Oliver’s own words,
“globaleyez has the software, services and expertise to help you monitor the compliance of your partner all around the world. We work this with a 360 degree approach and can support your strategic measures to meet long-term compliance and partnership success.”
Next to partner compliance, marketplace sales tracking is another of our services that could help you keep your distribution network in check. While marketplaces are immensely helpful in connecting with potential buyers, they’re usually hard to monitor for a brand.
Your distributors in far away lands use local marketplaces that you may not have access to, which means that you have to take your distributors’ word for what they’re doing over there. Or, you may simply lack the time or skills to monitor your distributors on Amazon, eBay, and the rest. Our marketplace sales tracking service is designed to bridge this gap for you.
We can monitor sales and merchant turnovers on various marketplaces, providing you with thorough reviews that let you know exactly what is going on. We track sales volumes and merchant activity, constructing reports on how much each seller is selling and whether they’re harming your brand in the process.
Marketplace sales tracking is an excellent service that fits perfectly into our comprehensive 360° approach to online brand protection.
As Nike’s example shows, brands have to make tough decisions when a distribution network fails to live up to its expectations. But controlling a large network of resellers is harder than it looks. E-Commerce and online marketplaces have further muddied the waters and make it even more difficult for a brand to keep an eye on its distribution network.
However, brands can’t afford to lose track of their distributors and how they represent them in various marketplaces. A distributor who doesn’t comply with your brand’s requirements costs you a lot more than money - a tarnish on your brand’s reputation that may be hard to erase.
This is why the online brand protection services of globaleyez are crucial if you want to protect your brand’s image. Contact us to find out how we can help you control your distribution network and protect your brand.