POV

POV: Prime Day 2019 Preview

Background:

On July 15th Prime Day returns for its fifth year to offer members access to millions of heavily discounted products. However, the pre-event offers and emails have already begun. This year the event stretches over 48 hours and will take place in 18 countries, with the U.A.E joining the party and providing a gateway to broader audiences across the Middle East.

Details and Implications:  

What started as a reward for existing Prime Members has quickly blossomed into one of the most hotly anticipated promotional events in the retail calendar. However, access to the event is contingent upon being a Prime Member, so although revenue and units sold will no doubt grab the headlines, Prime Day serves primarily as a subscription driver which last year tipped the 100m mark. And the reason for this focus is because the average Prime member spends 130% more than non-members annually.

Access to discounts on Prime Day aside, Prime membership offers free delivery and 2-day international shipping which helps develop exceptional stickiness with customers and keeps them coming back to Amazon at the expense of other retailers.

The stickiness of Prime makes Amazon the preferred destination for online purchases for members, but beyond that, membership also includes access to Amazon Video, Amazon Music and its gaming platform, Twitch. All of this adds up and helps position Amazon as being more than a place of purchase, but also a place of entertainment.

Last year, over 100 million products were purchased worldwide in the space of 36 hours. Although this was an enormous day of trading for participating brands, the best-sellers weren’t just Amazon devices; they were Amazon devices that connect to Amazon services. Fire TVs, Kindle Fires, Echo Devices and Alexa Remotes. Each of them connecting to Amazon Prime and each one of them requiring a Prime membership to buy in the first place. So, when Black Friday rolls around, Amazon will own an even greater audience of members for whom shopping on Amazon is the default.

An important difference between Prime Day and Black Friday is that the latter doesn’t create new spending, it just moves it slightly. As shown in recent years, the money consumers spend over Black Friday is money they were going to spend anyway; all Black Friday really does is concentrate pre-Christmas shopping in the last week of November, whereas Prime Day creates incremental opportunity.

It's also worth bearing in mind the size of Prime Day when put into context against Double 11 (or Single’s Day as it is also known). The annual Chinese (and increasingly international) shopping extravaganza saw sales of $30.8bn in 24 hours for Alibaba in 2018, 27% up on 2017 and hitting $1bn in sales in 1 minute 25 seconds. In contrast, Prime Day, for which Amazon does not split out revenue figures, was believed to have seen sales of around  $3.5bn for its 36 hours of shopping frenzy.

Summary:

On a day where focus is usually placed on volume over margin as a single event, our energy should instead be focused on how that margin loss is amortized over the year via retention and advocacy strategies.

Further Reading:

Day One, The Amazon Blog | eCommerceDB | Business Insider