SINGAPORE (THE BUSINESS TIMES) - Smaller sports shops are crying foul.
Top sporting brand Nike will not be supplying to them from January 2017.
It is a huge blow for these mom-and-pop stores located in Queensway Shopping Centre and Peninsula Plaza, which rely on top-selling brands to attract customers.
"Its move would force many of us, some of whom had been operating since the 1970s and 1980s, out of business soon," said Gurbachan Singh, 65, who has been managing Salam & Sons for over 30 years.
"We did business with Nike for more than 20 years. We followed their rules, never defaulted on payments nor brought in fake or parallel imports. Many of us don't understand why they are doing this to us," Mr Singh added.
Nike is one of the best-selling brands of shoes and clothing at small sports shops here. According to the 2016 Brandz Top 100 Most Valuable Global Brands report from market research company Millward Brown, the American brand topped the 10 most valuable apparel brands.
Several other shops in Queensway and Peninsula Plaza echoed Mr Singh's sentiments.
A 65-year-old store owner, who declined to be named for fear of reprisals, said: "What they are doing is wrong. I have been an account holder for over 20 years and have always supported the brand. What they are doing will destroy my livelihood."
Mark Penu, managing director of Premier Sports International, which markets and distributes sports merchandise, explained that brands like Nike "just want to get into bed with the big chains like Weston and Sports Link".
Faced with a similar situation, Mr Penu and his partner Hairul Amar had taken New Balance (NB) to task for a breach in an oral contract in 2011 by refusing to deliver orders taken in 2014. A dispute had arisen after Premier parallel imported some of the merchandise which NB promised to supply only to the bigger stores.
District judge Chiah Kok Khun ruled for Premier and awarded it compensation of an undisclosed sum this year.
Apart from Nike shifting its focus to the bigger stores, the smaller retailers told The Business Times they believe the decision is also driven by Nike's plans to grow its online stores.
Last year, the brand announced to investors its plans to grow Web sales 600 per cent by fiscal 2020 to US$7 billion. While the Web currently represents only 2 per cent of its total sales of US$30.6 billion, Nike projects that portion to grow to around 14 per cent in the next five years.
Nike's media relations office in the United States did not reply to an email query sent by BT.
The company made a similar move in the United Kingdom in 2014. It had then refused to supply shoes and clothing to any sports shop which did not sell more than £25,000 (S$45,000) of their products in a year; and also removed their credit terms.
The reason: it was no longer viable to supply the smaller shops. Nike, which sponsors the England football team, had said the move was aimed at cutting costs and improving consumer experience.
The Competition Commission of Singapore (CCS) said the competition law here does not intrinsically prohibit businesses from achieving market power or striving towards it.
"(But) businesses with a dominant market position are prohibited from preventing their competitors from competing effectively or shutting them out of the market through exclusive business practices such as exclusive agreements with their suppliers or customers. If such conduct is found to harm competition, CCS can take enforcement action," its spokesman said.
It added that it had received a complaint in February 2014 concerning exclusive supply agreements in the retail replica football merchandising industry in Singapore.
After preliminary enquiries, CCS found that suppliers would consider on a yearly basis the retailers to be appointed for new product list and designs to be released into the market. CCS said it was not difficult for retailers to enter into or expand their businesses for retailing replica football merchandise.
"As such, CCS found it was unlikely any retailer had significant market power to be able to prevent other retailers from competing in the markets," its spokesman said.
So, in order for the smaller shops to survive, they are now working jointly with the other prominent sports brands.
Salam & Sons, for one, will be working closely with Adidas.
"We have spoken to the brand and they are willing to come in to work with us. We are looking at allotting them prominent spaces in the shop and moving Nike away to the back," Mr Singh said. "It may look petty but we have to do so for our own survival."