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The biggest breakup of the week is official: After a two-year relationship, Nike is leaving Amazon.

The schism hit the news on Tuesday, when Bloomberg reported the overhaul of Nike's upcoming retail strategy. The shoe company looks set to pursue a direct-to-consumer strategy, making it yet another example of an industry giant following in the footsteps of a hot startup competitor. (Hey Nike, meet Allbirds.)

Inc.com columnist Jason Aten summed it up nicely on Wednesday, when he explained exactly why this is a big deal for Amazon--a company whose $232.9 billion in 2018 revenue dwarfed Nike's $34.5 billion:

For Amazon, the stakes are even higher, and not because Nike represented some enormous amount of revenue for Amazon, but because of what it represents in terms of the balance between brands and the platforms that sell their products.

If other companies follow suit, Amazon could see a significant exodus of valuable brand partners.

That's why this story matters for smaller retailers, especially those who struggle with the Amazon question daily. For years, it's been viewed as a necessary home for any consumer brand trying to get off the ground. Everyone shops on Amazon, so you need to go where the people are, right?

On the other hand, Amazon's platform is rife with copycats, price gougers, fake reviews, and counterfeit products. When you sell on Amazon, you hope that you'll find that magic mix of SEO and homepage placement. You pray that Amazon doesn't launch a competing product of its own. 

Nike reportedly had enough of the fake listings, which left the official Nike products buried on the sprawling website, according to Bloomberg. It remains to be seen whether more Amazon sellers will follow suit. At least one analyst thinks it's a viable strategy. "Amazon is just a traffic aggregator that reduces friction in consumption," Jefferies analyst Randy Konik told CNBC on Wednesday. "It doesn't build communities."

And that's the crux of the Amazon dilemma in 2019. The platform can undeniably attract eyeballs, but few companies--large or small--find themselves able to build brand loyalty there. Nike has its own community already. Arguably, it doesn't need Amazon.

If you can build your own community to match, you might not need Amazon either.

Published on: Nov 14, 2019