Blog postsAugust 01, 2018
Takeaways from 2018 Prime Day
Prime Day: To Sell Or Not To Sell
Prime Day 2018 was historic. That is, until next year, when it will be even bigger. Prime Day shoppers spent an estimated $4.2 billion during the sale—spanning across more than 100 million products. To compare, across all U.S. retailers, Americans spent $7.9 billion on Black Friday and $6.6 billion on Cyber Monday in 2017. Amazon has turned “Christmas in July” into an actual thing.
Many have written about and celebrated the operational glitches during Prime Day (site crashes and stock outs), but no one can deny its overall success. When the site did crash, Amazon displayed the “Dogs of Amazon” to soften the blow—demonstrating Amazon’s anticipation of overwhelming traffic volumes and maybe even a sense of humor (because when does a picture of a dog not solve everything?).
Despite its glitches, the fourth annual Prime Day was noteworthy. What’s more is that Prime Day has forced Amazon’s competitors to respond with deals and sales of their own.
In 2017, online shoppers that visited other major retailers’ sites on Prime Day were 35% more likely to make a purchase. Amazon has inspired other retailers and brands to join the fray and boost sales during a historically slow season. It is worth noting that some retailers have been boosting summer sales long before Amazon was even dreamt up. The Nordstrom Anniversary Sale started in the 1960s and is one of the biggest fashion influencer events to date.
New summer sales:
- Amazon Prime Day—now extended to 36 hours
- Zulily introduced its “Thrill Week”
- eBay offered tech deals for $119—the week before Prime Day
- Macy’s has “Black Friday in July”
- Best Buy has “Big Deals Day”
Subscriptions X 100 Million
It’s no secret that Prime Day is more about Prime signups than the sales for Amazon. To shop the sale, you need to be a Prime member. To be a Prime member you need to pay the (now) $119/year fee. With more than 100 million Prime members, you do the math.
Data also shows that Prime members spend more annually than non-Prime members—$1300/year on average—nearly twice the amount of non-Prime members. Of those that own an Echo, they spend even more: about $1700 each year.
Amazon has mastered this through Jeff Bezos’ implementation of Jim Collins’ flywheel business concept, which essentially gets consumers to purchase access to products—incentivizing members with convenience and a reason to justify their membership investment.
What Prime Day demonstrated is Amazon shoppers’ affinity for its loyalty program and the deals it unlocks during the 36-hour timeframe. So, the flywheel works, and illustrates that shoppers still value price, convenience, and a deal that’s too good to pass up.
Why isn’t every seller an Amazon Seller?
Prime Day isn’t just a shopping event for Amazon, it’s a bellwether of where retail and eCommerce is headed. Retailers have been inventing reasons to shop during the summer slump for years, more have joined the fray, and major marketplaces, like Wayfair and Alibaba, have also created their own shopping holidays.
But Amazon and major marketplaces aren’t right for every retailer and brand. Brands like Rolex, LVMH, and Vans have chosen to avoid Amazon. Sure, selling on Amazon and your own direct channel has proven to double revenues as compared to a single online channel—if you sell the right type of product.
However, Amazon has not quite figured out the luxury retail market yet—despite its efforts. The equalizing effect of Amazon’s marketplace, it’s ubiquity, and utilitarian design takes a lot away from the mystique that luxury retail is built on. Can you imagine checking out on Amazon and in your cart you have a Rolex watch and a box of Ziplock bags? Today, that’s farfetched.
Reasons brands don’t participate in Prime Day
- Smaller apparel brands and specialty items won’t be advertised on Prime Day
- Many Prime Day deals require brands to significantly cut their margins to qualify
- Fulfillment by Amazon (FBA) is cost-prohibitive
- Brands wanting to attract browsing-based discovery and buys
- Prime Day is not about your product—it’s about teaching members how to use Prime
- There’s little-to-no control over your brand experience: how it’s placed on a page, the products next to it, the box it’s shipped in (which has Amazon’s logo, not yours)
Benefits reinforced by 2018 Prime Day
Using a special day like Prime Day to reinforce your loyalty program is lesson number one. Smaller-brand loyalty programs like StitchFix, Trunk Club, Rent the Runway et. al. are tapping into this in an amazing way. They offer convenience, browse-ability or targeted selections; fast last-mile delivery and benefits to members like free shipping.
Lesson number two: Your company needs a special sauce. The flywheel concept and fulfillment infrastructure makes up Amazon’s bread-and-butter, but is almost impossible to recreate. Instead, retailers and brands have a bevy of solution providers designed to help them reach more customers and convert more browsers into buyers. There are a host of SaaS (Software as a Service) providers that can improve eCommerce sales—from payments, to order routing, to fulfillment, to last-mile transportation. Even social media channels like Instagram are making it easier for companies to do their own marketing and reach millions of users in more locations. Combine all this and small or big brands and retailers can grow profits without Amazon or Prime Day.
But wait. I want to sell on Amazon. (And Target, and Walmart)
Expanding your sales channels to include Amazon, Target, and Walmart can mean more sales and growth for your business. If your growth strategy includes these super channels, you have a variety of options on how to do it efficiently. Many have been discouraged from these channels due to a variety of fulfillment restrictions and policies. Just look at Amazon for example. Commonly cited roadblocks to selling on Amazon include:
- Prior approval by Amazon before you can sell
- Rejection of certain products not eligible for FBA, or that need to meet certain requirements before they can be sold with FBA
- Requirements for labeling, packaging and shipping inventory must be met for all shipping to Amazon fulfillment centers
- Getting inventory to a fulfillment center without incurring high shipping costs and keeping a minimum inventory at a fulfillment center
Circumventing these roadblocks is possible. From companies that ship product directly from China to Amazon fulfillment centers, to companies specializing in prep, this growing service market can help you add more sales channels without impacting your margins.
For U.S. brands working to get smaller inventories, or inventory numbers that swing widely based on demand, to an Amazon fulfillment center, flexible solutions for storage and transportation can help organize the fluctuation. For example, having a dynamic network of warehouses with locations near replenishment centers, can help you position inventory closer—enabling you to optimize for storage costs and transportation times, while also meeting on-time, in-full (OTIF) requirements.
Say goodbye to long-term storage fees
Prime Day and Q4 peak seasons mean increased storage fees. While it’s worth it for retailers and brands to consider selling through every channel, including Amazon—even with the monthly fees—it’s a waste to have to pay those twice yearly, long-term storage fees. It’s not efficient and can be avoided.
To get around these fees, many companies lower prices to move inventory. That’s good for the Amazon shopper, but what if there’s a way where you don’t have to lower prices? And what if there’s a way to use the same storage facility to ship to Amazon fulfillment centers as well as direct to your customer? There is. Having a dynamic network of warehouses and fulfillment services can make this possible for retailers and brands of all shapes and sizes.
Outsourcing logistics and warehousing releases you from long-term leases on underused storage facility, allows you to expand your network across the country without expanding your company-owned or managed real estate portfolio. As stated above, dynamic, flexible warehousing services can now also help with finding unique logistics strategies to serve your marketplace channel more efficiently and cost-effectively. Not only can you lower costs, you can also spend less time on logistics management and more time on customer acquisition and loyalty program creation. Feed your own flywheel
2018 Prime Day shopping at FLEXE
We did a quick poll of FLEXE employees to see who participated in Prime Day deals. The numbers are in:
- 52% made a purchase during the sale
- 53% of purchases were Prime Day exclusives, 35% were not on promotion, 12% were both
- 67% of purchases were not planned; 33% were planned
- 71% said their unplanned purchases weren’t outside their normal scope of purchases, 29% said they were
- 68% said they do not have buyer’s remorse, 25% said maybe