Amazon Prime Day, a Win-Win for All Retailers?

Amazon, the tech giant, is the largest Internet-based retailer in the world by total sales and market capitalization. They have over 80 million subscribers who receive exclusive perks such as limited product access, free shipping, and discounts on many product categories such as electronics, home and heath care, groceries, etc. Subscribers are also able to participate in Amazon’s annual Prime Day (2017 was the third installment of this event). On Prime Day, prices are slashed on many high-demand products like Amazon Echo and Amazon Kindle as well as thousands of other products. These are deals consumers typically do not have access to throughout the year. This year’s Prime Day was a big success for online retail giant, Amazon. The 30-hour event grew more than 60% (globally) compared to last year. Sales rose over 50% in the U.S. alone. This was a global record for the company. Sales surpassed their Black Friday and Cyber Monday. Although this year’s holiday lasted 30 hours vs. 24 hours, other factors contributed to the record event that include additional participating countries (13 this year, up from 10) and an increased number of Amazon Prime subscribers (80M in the US alone…up from 58M end of Q1 2016). This was the company’s third Prime Day. Some of the most sold items included their own electronic devices such as the Echo and the Kindle.

Other online merchants grew 44% on Prime Day, reported by Salesforce Commerce Cloud (formerly known as Demandware). The results were based on a 500-million online shoppers’ analysis. Also, a 24-hour period was compared to last year, not the longer, 30-hour event held this year. Highlights included higher conversion rates for these non-Amazon retailers. Compared to prior day, 34% more shoppers purchased items on Prime Day. Discount rates werehigher on Prime Day for these retailers vs. prior day, which contributed to their positive results. Furthermore, the majority (77%) of shipments coming out of the non-Amazon retailers were free.

An analysis of top revenue-generating non-Amazon retailers demonstrated that 47 retailers attempted to convert Amazon shoppers to their site by offering “Prime-like” deals. Amazon Marketplace clients like Skubana, and their estimated 1000 retailers were an example of Prime Day success. Their sales had an 80% boost compared to average daily sales. Typically, marketplace sellers account for 65% of Amazon sales worldwide. On Prime Day, this dipped to one third of Amazon sales due to the attractive discounts on high-demand segments like electronics and home appliances which Amazon promoted. To help increase marketplace sales on Prime Day, many savvy merchants utilized Amazon’s Seller Fulfilled Prime service rather than Fulfillment by Amazon. This allows sellers to handle warehousing and delivery while retaining their Prime seller status. This decreased shipping times, increased customer satisfaction as well as sales. Some non-Amazon retailers also create a halo effect of sales by extending their deals after Prime Day.

Although Amazon is online retailer king in the U.S., many other online retailers can benefit from them and/or from Prime Day through tactics such as selling in their vast marketplace audience, utilizing their fulfillment services, and riding their Prime Day coattails, which enhances their sales and customer reach. Alternatives include, online retailers establishing their own Prime Day or further partnering with Amazon similar to Nike (link). Sears just announced selling their Kenmore appliance on Amazon as well (link). Sears Holdings shares rose 17% on the news.     

Since Prime Day provides deals only for Prime members, opportunities arise for other online giants like Google, eBay, Walmart, and Best Buy. Other online retailers don’t have their own day for various reasons…i.e. Walmart relies on its “everyday low price” model rather than creating a “Walmart Day”. Walmart is also focusing on strategic acquisitions and partnerships to enhance revenues and expand consumer reach. Recent examples include Jet.com and Bonobos. Other factors includelack of technical capabilities and the logistics to support the onslaught of shoppers and traffic during these events.  Amazon, who focuses on capabilities and the utilization of powerful shopper data provides themselves a unique differentiator and core competency. 

One who should entertain having their own “Day” is Apple. They have over 200M active users in the app store and over 800M iTunes accounts. Developing more robust iTunes and the App Store selling platforms could materially boost company revenues. They do not have the wide array of products that Amazon does, but offer products/services that utilize the Apple ecosystem…i.e. TVs, wearables, software, etc. Incorporating a Prime-like membership program would be an incentive that provides free shipping, discounts, exclusive products, i.e., limited iWatch colors, etc. Apple is built as an aspirational, fashionable brand, so providing discounts and deals on an annual day could spike sales for the company and/or its partners, but they would have to be careful to not cannibalize their sales or dilute their brand image the other 364 days of the year.