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POV: Prime Day 2018 Results

Background:

Amazon held its fourth annual Prime Day on July 16th. A holiday created for its loyal Prime customer base (now 100 million and counting) enticing them with over 1 million deals, including hefty discounts on Amazon’s own Echo, Kindle and Fire devices.

Results:

As anticipated, Prime Day 2018 marked the highest grossing day in Amazon history, topping last year’s Prime Day, as well as Black Friday and Cyber Monday:

  • Despite technical hiccups (the site went down early on), Amazon sold more than 100 million products.
  • Analysts quantify revenue at £4.2bn, up 33% increase vs. last year’s estimate. This year’s extended 36-hour format fueled the growth figures, giving people 20% more time to shop vs. last year.
  • Amazon reported 45% more Echo devices were sold than average.
  • Merchants selling on the platform saw an estimated 28% increase in sales compared to last year.
  • Beauty, Toys and Fashion saw noticeable growth next to established performers Electronics and Home.
  • Prime Day remains a key vehicle for membership acquisition, with Amazon welcoming “more New Prime members on July 16 than any previous day in Amazon history”.

Beyond the numbers, we observed several noteworthy trends for Amazon and the wider Retail space. 

Prime Day Beyond Amazon:

In a bid to stay competitive or simply ride the wave of an extra day and a half of heightened consumer frenzy, other retailers rushed to run counter-deals. In the US, Best Buy called it ‘Big Deals Day’, Macy’s ‘Black Friday in July’ and eBay reminded customers “You Don’t Need to Be a Member to Shop Here”. Curry’s, La Redoute, Zalando and others followed suit in Europe with aggressive pricing tactics. Target’s ‘One-Day Sale’ generated the "highest single day of traffic and sales of 2018", a testament to Prime Day now firmly being a retail event which extends beyond Amazon’s ecosystem, as consumers flip between marketplaces and retailers in search for the best deal.

A Push for Private-Label:

As anticipated, Amazon used Prime Day to push its private label offerings with heavy discounts across categories beyond electronics, most notably fashion. In tune with its growth ambitions for the category, Amazon used Prime Day to boost awareness of its private-label fashion lines with ‘FIND’ and ‘Buttoned Down’ dominating fashion deal pages across markets. With Prime Day generating 5 million in fashion sales, and analysts projecting revenue to reach $40bn by the end of this year, Amazon is on course to eat away share particularly from affordable basics and mass-market players.

Increased Advertising Investment:

As Amazon pushed its own product ranges aggressively, advertisers were busy investing in paid visibility to compete. With an overall increased number of deals on the platform, brands were under more pressure to stand out, explaining the influx in larger format display ads used to increase visibility on key deals and category pages. CPG and electronics advertisers dominated the list of top spenders, with Phillips leading the rankings on SOV. Albeit a small share of its overall revenue, Amazon’s ad business is growing fast and is likely to report another record-breaking number when Prime Day figures are revealed in its Q3 earnings.

Incentivised Voice Shopping:

Once again Prime Day generated startling sales figures for Amazon’s own devices thanks to hefty discounts. Once again Amazon was willing to take a hit on device margins to increase its penetration of voice-assistant Alexa and this year Prime Day also incentivised members to shop via Alexa, with early access to deals and cash incentives for first-time voice shoppers. Preferred deals and pricing and familiarising users with shopping via Alexa in the process, may become a strategy beyond Prime Day in Amazon’s bid to dominate the voice-assistant war with Google and Apple.

Fuelling the Prime Programme:

While short-term sales were impressive, Prime Day remains a membership recruitment and retention programme to generate longer-term momentum. Prime Members spend $800 more on average ($1,000 when using Alexa), buy from a broader range of categories and buy more frequently. Once locked in, customers look to maximise membership value by turning to Amazon for their every shopping need. As such, Prime Day continues to be an important lever for Amazon in spinning its flywheel for sustained growth.

Further Reading:

Gartner L2 / Digiday / Forbes