SKU’d Thoughts 30: Are other retailers benefiting from Amazon’s Prime Day?

Four years ago, Amazon launched Prime Day, a one-day shopping discount bonanza for its Prime members as part of its 20th-anniversary celebration. Last month, the company held its 5th annual Prime Day and this time it lasted 48 hours. More than 175 million items purchased from the e-commerce giant during the two-day online event. Prime Day has become a bonafide shopping holiday that retailers can’t ignore. According to RetailMeNot, an estimated 300 plus competing sites, up from 194 in 2018, offered Prime Day-like deals of their own to attract customers.

So, are these other retailers actually benefiting from Prime Day? The short answer is maybe and here is why.

Adobe Analytics estimates that during this year’s Prime Day, large retailers who had major discounts saw a “68% lift in revenue across the two days, while niche retailers also saw a significant increase in online sales at 28%.” These retailers used messaging, like “Black Friday in July”, that would resonate with e-commerce deal-seekers. Retailers like West Elm and ULTA Beauty cleverly incorporated variations of the word “prime” (Primo Days, Primer Days, Primary) in their promotional activity.

Traditionally, most retailers have sale events to get rid of excess or slow-moving inventory. But that’s not what’s driving Amazon’s Prime Day. The e-commerce giant wants to gain more Prime members, the company’s most valuable customer base. According to Consumer Intelligence Research Partners via RetailDive,

“Prime customers spend more and more often: Prime customers spend an average $1,400 per year at Amazon, compared to $600 for non-members; they shop at Amazon an average of 26 times per year, compared to 14 times for non-Prime customers; they spend $55 per visit, compared to $42 for non-members, and they buy 2.2 items per visit, compared to non-members’ two items.”

Amazon reported gaining more new Prime members on July 15 than it ever has in a single day.

Retailers who had discount events concurrent to Prime Day only drove short-term value to their business. Of course, customers who are very pleased with their experiences could return in the future but competing Prime Day retailers lack an incentive structure to keep those deal hounds as long-time customers. On the other hand, Amazon leveraged its entire ecosystem and for $119 a year, Prime members get perks which include free and faster shipping, video and music streaming, reading and audible books, and grocery benefits. Amazon’s suite of perks makes it difficult for any single retailer to compete with them on Prime Day.

Retailers have to think more creatively to compete with Amazon. I shared some recommendations on SKU’d Thoughts 18 that can be leveraged by retailers to build long-term business value.

Cross posted on Medium