The world's largest footwear maker is preparing to launch an Amazon store, but will this new strategic partnership work out?
Mark Parker, Nike’s CEO, confirmed the two companies will be testing out a partnership in the coming months. The world’s largest footwear maker is preparing to launch an Amazon store, effectively cutting out the middleman from Nike’s current Amazon presence.
This partnership will enable Nike to have better control over their brand and dictate how their products are marketed on the online retailer’s site. Sounds good, right? Well, not so fast.
Business partnerships don’t always have the best success rate. In fact, a common statistic many experts refer to states that 80% of business partnerships will fail. Admittedly, the direct source and origin of this statistic is murky (much like the common statistic that claims 50% of marriages will end in divorce), but popular opinion is that business partnerships are exceedingly difficult to pull off. And of course they are. Building an effective partnership is not unlike developing a personal relationship–it requires work, constant and clear communication, well-defined expectations, and an alignment of values and goals.
However, when a strategic business partnership is successful, it can be extremely lucrative. Spotify and Starbucks, BMW and Montblanc, and GoPro and RedBull are few examples of companies who decided to work together and are now reaping the benefits.
So, if your company, like Nike and Amazon, is considering forming a strategic business relationship, take the following into account before you get started.
Avoid direct overlap in offerings
This may seem like a no-brainer, but you’ll want to avoid partnering up with any business that can be considered direct competition. There should be zero overlap between the two companies in terms of offerings or products.
I learned with Centric Digital (a very service-oriented business) that partnering with similar service-based businesses can create conflict. This is especially the case when the partnership involves sharing clients.
For example, let’s say a strategic service provider is considering partnering with another agency that specializes in building and delivering on strategy. These agencies decide to team up and share clients so that one creates the strategy and the other puts the strategy into motion. While this partnership sounds like a good idea in theory, it creates the potential for either agency to try to mimic their partner’s offerings and cut them out of the picture.
Even product-based businesses can experience this issue when one company thinks they can create a similar product as their partner.
Overall, the best relationships seem to form between service-based businesses and product-based businesses–like in the case of Amazon and Nike. Of course, there are exceptions to this rule. The key is to think through any potential for overlap in offerings and determine if there is a way to avoid it right off the bat.
Start small and take your time
The quote “Aim small, miss small” applies heavily here. You might discover there are three different companies that are well suited for a partnership, but you’ll want to focus on one at a time. It takes a lot of time, energy, and resources for a partnership to fully develop. Take the time to get to know the company, the brand, and the people you’ll be partnering with. Interview the business as thoroughly as you would an employee you want to hire.
As you’re developing the relationship, you’ll also want to make sure your business missions and values align. Spotify has been considering ending their partnership with Uber due to the ride-sharing company’s recent scandals. This scenario might have been avoided if Spotify learned more about Uber’s practices and political leanings from the start.
Even with the Nike and Amazon partnership, Nike’s CEO is making it clear they are in the early stages of development. They’re not rushing into this partnership and are testing the waters first.
Manage the relationship and set expectations
From the initial “courting” phase to the actual execution, a business partnership needs to be carefully nurtured and managed. You’ll want to assign someone to develop the relationship, get the partner interested, send a proposal, negotiate contracts, and oversee the ins and outs of the partnership in action. This person’s responsibilities would be similar to that of a sales rep or an account director–their goal is to build and maintain the relationship.
From there, you’ll want to ensure this person is setting and managing expectations. Will your company provide a certain percentage of sales to the other business? Do you have a target number of customers you expect to receive from them or vice versa? Is there an overall goal you’ll be working towards together?
These questions need to be answered in detail, thoroughly documented, and signed off on. If any disputes pop up or one company is not pulling their weight, you can always refer to the initial agreement. This can take months to develop, but it prevents any miscommunications from happening down the line.
Time will tell if the Amazon and Nike partnership will work out, but it’s a good sign that they seem to be moving into this partnership at a slow and steady pace. Combined with well-documented expectations and an avoidance of direct overlap, this could be the start of a beautiful relationship for these companies. And, by keeping the above best practices in mind, your business could form equally lucrative partnerships that may one day rival that of Nike and Amazon’s.