Amazon- Any challenger? I don’t think so
Following the drastic drop in stock price of footwear and sportswear giants Footlocker from $78 to $35 in the last 6 months , it seems amazon’s dominance cannot be challenged. According to the Foot Locker (FL) , Inc’s filings with the Securities and Exchange Commision (SEC), as of January 28, 2017, the company had 3,363 primarily mall-based stores in the United States, Canada,Europe, and Asia and nearly 70% of its products was from Nike. However, early this year Nike made an official announcement that they were going to start selling their products directly on amazon. This meant that buyers no longer had to go to the mall or footlocker shops to find their favorite footwear; all they had to do was to pick up their laptops and order them online. In spite of this revelation, most investors were still bullish about the FL stock because they believed that for footwears and sportswears, customers would usually prefer to go to the various stores to try them on first before buying them, hence Nike’s decision shouldn’t really affect FL’s revenue significantly.
However, what most FL investors didn’t really give as much priority to was that, Nike had entered into a deal dealership with not just any other e-commerce company but one with a perfect track record of taking over other industries “Amazon”. Amazon has taken America by storm, dominating in all aspects of shopping, from clothes to luggages, electronic gadgets to soccer balls, household appliances to medicines, automotive to books, and even now, an apparent takeover in the US retail grocery is imminent after the integration of amazon and whole food. According to a research done by Wall Street firm Needham, it is estimated that amazon will make up to 50% of all of america’s E-commerce by 2021. Amazon’s dominance has clearly just begun and more takeovers are yet to come!
But what makes Amazon such an indomitable force in e-commerce. Well most of Amazon’s success has been attributed to prime, which provides subscribers with a free two day shipping at a cost of $90/year. The speed and quality of delivery of amazon’s products are extremely commendable, and as such consumers feel safe ordering online on amazon at their convenience. In this example, Nike applied game theory when they decided to sign the deal with amazon. Two options were available for them: stay loyal to footlocker or sign with amazon, but it seems signing with amazon was the dominant strategy. This is so because if they sign with amazon, which they did, Nike would still supply sportswear to footlocker per contract and demand from footlocker. Moreover, Nike will still get revenue from both online and stores which is a win for both Amazon and Nike but a huge loss for Footlocker. Also the structure of this relationship is balanced since after the deal, there seemed to be some form of rivalry (-) between amazon and footlocker whiles the relationship between Footlocker and Nike is also very week now (-): an anticipated deal between footlocker and another company shouldn’t come as a surprise in some years to come. However, the deal strengthened the bond between amazon and Nike (+) and hence the overall structure of the graph is balanced (2 negatives and 1 positive).
link= https://www.google.com/amp/amp.timeinc.net/fortune/2017/04/10/amazon-retail/%3fsource=dam