POV: Prime Day 2018
Prime Day returns on Monday, July 16th for its fourth year promising to be the largest grossing to date - having experienced an average growth rate (CAGR) of 60% from 2015-17.
Details and Implications:
For those who already have Prime Membership and have installed either the Amazon App, or downloaded the Amazon Assistant Plug-in, a ‘Sneak Peek’ of the top deals began on July 9th with more being revealed daily up until July 15th on the eve of Prime Day. Despite a reported $1bn in sales on Prime Day last year, revenue generated on this day does not make or break Amazon - it’s more of a hedge on future downstream revenue by habituating consumers to Amazon services.
The average Prime member represents an added $800 per year in spend vs. a non-Prime member. This figure increases to $1,000 when you include Prime customers who also shop with their Echo device, which offers a little more context regarding Amazon’s bet on Alexa. There are approximately 100m Prime members globally.
Electronics (and particularly Amazon-owned products) have led sales in previous years, whilst last year showing large gains in Fashion and Beauty. Following the acquisition of Whole Foods we expect Amazon to continue its focus on groceries alongside growth for the Home & Garden, Sports and Baby categories - all heavily featured on the Prime teaser page. Whilst the benefits for Amazon and the customer are clear, for brands and other retailers, the question is whether to compete or retreat.
Such is the power of Amazon and Prime Day that it has lifted sales on competitor retailers and marketplaces as brands and retailers rush to offer promotions to remain competitive. Our research shows that consumers are acutely aware of aggressive pricing tactics and will interchangeably flip between retailers and marketplaces on Prime Day in search of the best deal. Whether sold through Amazon, other retailers or direct to consumer, the singular expectation for consumers on Prime Day is value – here are some predictions on what we’ll see.
Increased investment in Amazon advertising: Pushing private-label ranges organically will encourage brands to boost visibility on Amazon using ad dollars to compete on the platform. With Prime Day becoming an integral part of the online retail calendar, we will likely see an increasing number of brands invest in Amazon’s advertising suite to capitalise on this peak shopping period.
Incentivised shopping via Alexa: Last year Amazon pushed primarily its own devices (Echo, Echo Dot). This year, we expect Amazon to use special Prime Day discounts to incentivise users to shop via these devices using Alexa. Amazon subtly hinted at this in a statement last week: “Prime members will enjoy the biggest deals yet on Alexa-enabled products, including Echo, Fire TV, and Fire tablets this Prime Day”. The belief is that Amazon will use Prime Day used as vehicle to familiarise consumers with shopping via voice-enabled devices.
New category entrants: While the expectation is that Electronics, Fashion and Home & Gardens goods will continue to see majority of revenue from Prime Day, our research suggests that Grocery, Toys, Beauty and Baby categories will see noticeable growth that will sustain beyond Prime Day.
Integrating offline: We anticipate that this year will be the first to integrate offline following the acquisition of Whole Foods. Prime customers already receive discount at Whole Foods, but the expectation is that this will increase on Prime Day on select and popular products but will also incentivise cash back for purchases made with Amazon Prime Store cards.
New Amazon Tech: Just as with Echo, Echo Dot, Fire TV and Tablet in previous years, we believe Fire TV Cube will dominate the Electronic sales. An all-in-one entertainment unit, Fire TV Cube is an Alexa-enabled device which is expected to link with Amazon Video and other Entertainment and allow users to control the TV, lighting and smart-speakers.