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Nike Thought It Didn't Need Amazon -- Then the Ground Shifted (wsj.com)
An anonymous reader shares a report: For years, Nike was one of the biggest holdouts against Amazon.com, refusing to provide its sneakers and athletic clothing for sale on the hulking e-commerce site. Its products were so cool, the company reasoned, it didn't need or want the help. Recently, Nike reversed course. Behind that decision lies a dramatic shift in the balance of power between brands and Amazon (Editor's note: the link could be paywalled; syndicated source). For decades, big consumer brands carefully controlled which retailers could sell their wares and at what prices. And for years, Amazon left the brands alone. Lately, the explosion of third-party sellers on the site has led to authentic goods from companies such as Nike, Chanel, The North Face, Patagonia and Urban Decay being sold on Amazon even though they don't authorize the sales, undercutting their grip on pricing and distribution. Even though Nike didn't send Amazon its products either directly or through approved wholesalers, Nike is the most purchased apparel brand on the site, according to a Morgan Stanley survey. A recent search for Nike products on Amazon turned up roughly 73,000 items. These days, there are so many third-party resellers, who generally are allowed to resell goods they have lawfully acquired at whatever price they want, that companies see few ways to stop them.
Not true. You don't understand the remainder market:
The manufacturer produces a product and sells it to the wholesaler for 25% of list price. The wholesaler sells the product to the retailer for 50% of list price. The retailer sells it to the consumer at somewhere around list price (more when it first comes out, less as time goes on.) When the NEW version comes out the retailer returns their unsold merchandise to the wholesaler for credit towards their next purchase. Even with this return credit, the wholesaler has made a profit on the deal.
Typically manufacturer - wholesaler contracts prevent the wholesaler from selling below cost until the item is replaced by a newer model in the manufacturer catalog, which may only be a matter of a few months. Sometimes wholesalers will sell stock to the remainder dealers ahead of schedule if the product is not selling thru to retailers quickly enough...assuming they think the manufacturers will not catch them, or the penalty for getting caught is less than the cost of keeping the products sitting in the warehouses.
Now, the wholesaler sells the product to the remainder dealer for 10% of the list price (they already made a profit -this is just EXTRA PROFIT). The remainder dealer then sells the product to discount merchants for 20% of the list price. The discount merchant sells the products for 50% of the list price -or whatever they can get. Discount merchants typically do not have the option of returning unsold merchandise for credit like regular retailers do, so selling at a low price is better than no sale.
According to the doctrine of first sale (codified in 17 U.S.C. 109) we can sell, display, or otherwise dispose of any (non-counterfeit) item we have without needing the permission of the manufacturer / brand-owner / copyright holder. So third party merchants may not have the latest fad item, but we can sell whatever we do have for whatever price we want.