Blog postsJuly 17, 2017
Sufficiently “Primed”? What We Can Learn from Amazon Prime Day
Tuesday of last week (July 11) was Amazon Prime Day—a holiday that single-handedly accounts for Amazon’s biggest sales day of the year. After running its third annual Prime Day, it’s clear the Amazon-specific holiday is only getting smarter and gaining traction for boosting sales in retail’s second-slowest month of the year.
Amazon Prime Day began as a marketing and sales event to celebrate its 20th anniversary in 2015. The results of the first event surpassed Amazon’s 2014 Black Friday sales, but customer backlash to the event’s promotions wasn’t great. Many felt the deals weren’t compelling and sold out too quickly.
But that didn’t stop Amazon. Year over year, Prime Day continues to break its own records for highest sales, and 2017 was no exception. Amazon has gotten smarter about product promotions and how to convert more buyers into Prime members in order to take advantage of the holiday.
A look at Amazon’s 2017 Prime Day stats:
- Prime Day was extended to 30 hours, instead of 24 hours—slightly conflating figures year-over-year
- When compared to the same 30-hour window in 2016, sales grew 60% (hence, conflation—last year’s Prime Day sales only fell within a 24-hour period)
- More new members joined Prime this year than on any other day in the company’s history— a loyalty program that already has 64% of the U.S. market (85 million U.S. households)
- Echo Dot was one of the best-selling items, at a 30% price cut, and overall Echo sales were seven times higher than in 2016, followed by Kindle, and Prime membership subscriptions
- Thanks to the Prime Day subscription boost, Amazon is on track for having 50% of all U.S. households as Prime members
- More than 3.5 million toys were purchased on Prime Day
- Other popular items this year included: Sony Playstation 4 (U.K.), Happy Belly bottled water (Japan), and Soda Stream (Germany and Austria)
So what does this mean for Amazon?
Boost Prime memberships
A key strategy behind Prime Day is to boost its subscription numbers. With 64% of U.S. households (85 million) having a Prime subscription, Amazon is perpetually incentivizing customers to buy through them to get free, two-day shipping. And it’s working.
Prime members convert more often and for higher amounts. On average, Amazon Prime members spend nearly twice as much on Amazon as non-Prime members ($1300 vs. $700 per year).
If we just take the U.S. averages, in a year, Amazon brings in…
- Prime members: 64% of the U.S., or 85 million households, spending $1300/year on average brings in $110.5 billion (not including the annual $99 membership fee)
- Non-Prime members: 36% of the U.S., or roughly 47 million households, spending $700/year brings in $33.6 billion
The numbers speak for themselves.
Boost sales during the driest season
The hype behind Prime Day has turned a traditionally dry retail season into Amazon’s biggest sales day of the entire year—surpassing both Black Friday and Cyber Monday.
It isn’t completely hurting other retailers, either... In fact, it could be helping them? In response to Amazon’s Prime Day, many retailers have set up their own competing promotions—enticing shoppers to consider non-Amazon deals. Walmart’s own website and digital branch, Jet.com, were the closest in price matching this year.
Boost its Q4 strategy
Many have suggested Prime Day is more than just a way to boost sales during the summer, but also a test-run for peak season demand during the holidays. Not a bad theory.
By generating demand in the off season, Amazon can assess and refine its logistics strategy and operations prior to Q4 demand.
Not surprisingly, there’s a lot of strategy behind the scenes to pull off fast, free delivery at such scale. In planning for Prime Day—and Q4—Amazon predetermines which products to promote and allocates inventory throughout its fulfillment centers to shorten the last mile of delivery and offset shipping costs.
Then, using data from past holidays and Prime Day, Amazon can fine-tune its holiday strategy and pivot accordingly as Q4 approaches.
Simultaneously, Amazon is proving to its Prime members that it can meet, and often beat, it’s free, two-day shipping promise—even when demand is high.
Calling all Retailers: Create your own Prime Day
The scale of Amazon is unbeatable, but the strategy is not. Amazon is essentially doing what any retailer would during the holidays—selecting its best-selling products and creating promotions that drive demand and increase sales.
Because Prime Day is designed for Prime members, its entire value prop relies on its delivery promise of free, two-day shipping—and in some cases even faster than that. That means Amazon allocates inventory across its fulfillment centers to ensure the products ordered are delivered quickly.
eCommerce retailers can apply the same strategy and augment fulfillment networks with on-demand, pop-up fulfillment centers set up to fulfill orders on the top-selling SKUs. With on-demand fulfillment “nodes”, you can add the square footage and fulfillment services you need for the amount of time you need it (aka Q4).
Prior to your holiday product promotion, manage and allocate selected inventory across the on-demand fulfillment nodes so that products are strategically placed for fast, free delivery.
With on-demand, pop-up fulfillment, you can:
- Optimize customer acquisition and retention through your delivery promise
- Target specific regions in which you want to promote products
- Reduce shipping times and costs by moving products closer to your shoppers
- Minimize the risk associated with traditional fulfillment networks by offsetting capital overlays and long-term lease commitments
A more dynamic approach to warehousing and fulfillment can make all the difference for eCommerce. After all, it’s the backbone to Amazon’s success. Why can’t it be yours, too?