You may have enjoyed the fireworks last week on July 4th and beach and backyard time with family and friends, but over at Amazon the relentless ninjas were preparing for the biggest baddest Prime Day yet — and likely salivating over your market share.
Amazon released three announcements regarding Prime Day last week. First: this year, the fourth annual Prime Day will be six hours longer, running for a full 36 hours from noon PST (3pm EST) July 16, to midnight July 17 (3am July 18 EST). In addition to extended hours, Prime Day extends to four other geographies: Australia, Singapore, Netherlands, and Luxembourg, in addition to U.S., UK, Spain, Mexico, Japan, India, Italy, Germany, France, China, Canada, Belgium, and Austria, for a total of 17 countries. This is all to say, Prime Day 2018 and Prime Day 2017 aren’t even comparable. But hey, that’s the way Amazon rolls.
No doubt Amazon wants to meet or beat last year’s Prime Day metrics, when sales rose 60 percent year over year. One obvious way to goose up the numbers is additional hours and geographies. More products and free Prime 30-day free trial memberships to further drive traffic to the site. Amazon unboxed deals across its exclusive brands (private labels) ahead of Prime Day. At 25 to 60 percent off all apparel and accessories, home furnishings and electronics, plus everyday essentials, the values mirror those found at off-price retailers and outlets. There will be more than one million deals exclusively for Prime members with twice the number of deals on Amazon devices and a whopping 50 percent increase in Spotlight Deals featuring the deepest discounts on top brands and Amazon’s most popular products.
Why would anyone shop anywhere else? Well Amazon addressed that question in the third press release of the week, “Prime Day Empowers Small and Medium-Sized Businesses on Amazon to Create New Jobs and Reinvest Locally.” More than one million SMBs are selling on Amazon. Just gag me now! Seriously, if the bargains don’t lure you, then a guilt trip will. More than 20,000 small and to mid-sized businesses (SMBs) surpassed $1 million in sales in 2017, thanks in part to Prime Day according to Amazon. Really, it is just one big mall; thank God for the search function, that savvy Amazon has turned into a profit center, charging up to 12 percent for items sold through a “sponsored” listing. This is virtually essential SMBs to be visible among the millions of products on the Amazon site.
And let’s not forget Alexa! Just ask her for the Prime deals and look for the Prime Day launch of—get this– the first Alexa-enabled kitchen faucet, the Delta Trinsic Touch2O. I just can’t wait to tell Alexa to run the water! Prime Day 2018 will also include deals on many Amazon devices: Alexa-enabled products like Echo, Fire TV and Fire tablets, and new categories from home security to Echo devices with screens (The better to hear you with, my pretty). In fact, the Amazon Echo Dot was the #1 selling on Amazon Prime Day 2017, and InfoScout estimates electronics represented 35 percent of Amazon Prime 2017 spending, down from 37 percent in 2016; apparel was seven percent, down from eight percent year over year; only health & beauty increased in penetration, to 10 percent from six percent while home & garden was flat at 17 percent.
Prime Day as a Recruiting Tool
In reality, Prime Day is a recruiting vehicle for membership, luring shoppers into free shipping, low prices, convenience, and selection. Kantar estimates approximately 57 million U.S. households had a Prime membership in 2017, and Bezos said in April that worldwide Prime members have exceeded 100 million. Prosper Analytics surveyed more than 7,000 adults 18+ older this June, 34 percent of which intend to shop Back to School/ Back to College this year, and a full 53.6 percent intend to use Amazon Prime specifically for BTC/BTS shopping in 2018, up from 34.2 percent who used Amazon Prime last year. This is a whopping increase and could amount to as many as 15 million additional shoppers for Amazon Prime Day. And as most of TRR readers know, a Prime membership is sticky and its value extends far beyond free shipping. The bundled Prime offering on shipping, Prime videos, free Amazon video content, a free digital book 12 times a year, free Amazon music — and with the Whole Foods acquisition, Prime members get deep discounts on select best-selling foods plus an additional 10 percent off hundreds of sale items.
Look at Amazon Prime membership among retailers that traditionally benefit from back-to-school shopping: Kohl’s, Target, and Walmart. As the above chart illustrates, Amazon Prime membership is becoming pervasive: 44 percent of Walmart shoppers are Prime members, up from 41 percent in June 2017 and 29 percent in June 2016. This metric is even more worrisome for Target, where 55 percent of Target shoppers have Prime up from 47 percent in June 2017 and 39 percent in June 2016. Granted the slope of the increase is slowing, but Amazon’s penetration of a retailer’s customer base via Prime makes each additional dollar in sales that much harder as your shopper is comparing the price/value proposition to that of Prime and the sunk cost of a Prime membership. Each incremental purchase on Amazon amortizes the perceived cost of Prime membership.
When InfoScout queried 6,284 2017 Prime Day shoppers about where they would have shopped if they didn’t shop Amazon on Prime Day the response was Walmart (51.5 percent) and Target (37.4 percent) followed by assorted retailers’ websites (18 percent).
Will the 20 percent increase in the cost of Prime membership to $119 impinge on renewals and new memberships? Amazon’s CFO, Brian Olsavsky, explanation is far from compelling when he stated the 100 million products available for free two-day delivery (can you please begin curating!) is up from 20 million just a few years ago. Seriously, who in their right mind wants to wade through 100 million products?
With Amazon’s fourth annual Prime Day less than a week away, retailers and brands want to remain visible and relevant without losing too much money. Expect Amazon to suck the air and mindshare out of the proverbial room for 36 hours, so stick to brand building with one or two loss leaders during Prime Day and plan your own Back to School marketing fete later in July and August, timed closer to actual need and when the competition won’t be as sharp as Prime Day.
SMBs, as well as global brands, need to offer exclusives and limited editions to generate excitement, drive store traffic and trigger conversion. This is a page from the fast fashion strategy where shortened product runs and shallow inventory investments creates a sense of urgency to buy now at today’s price. Allow for some personalization with apparel, accessories and footwear. For example, at Furla the Metropolis handbag has multiple flaps to create the bag you desire today; simple leather, an animal print or velvet. Some accessories brands customize their handbags via personalized shoulder straps. These simple assembly choices help create an emotional connection with the brand. Nike and Vans have included consumers in the design process via customization. For years New Balance has had a customization platform. Passionate brand advocates result from these efforts. Create an emotional connection and use your store sales associates to develop relationships with your customers, one-to-one. Help your shoppers dream. That’s something Amazon hasn’t cracked Apple has. You can too!