New York, United States — In 2015, when Amazon first launched Prime Day, its annual shopping holiday in July, the e-commerce giant was teased by the media for launching “the Internet’s Worst Clearance Rack.”
The discounted Tupperware, detergent pods and Amazon-branded electronics didn’t quite live up to the hype the e-commerce giant had put into the sale, and disgruntled Prime members complained that Prime Day felt more like a “digital garage sale.”
Fast forward four years and Amazon has moved past these growing pains. Shoppers now eagerly anticipate Prime Day, largely for deals on tech, beauty and home goods, and Prime Day is Amazon’s biggest shopping day on its calendar. During last year’s Prime Day, Amazon sold a record 100 million products, and although it does not disclose exact sales figures, Internet Retailer estimated that Amazon made $4.19 billion during the 36-hour sale. This year’s Prime Day will run two full days, on July 15 and July 16, and so it’s expected that Amazon will once again break spending records.
So where does that leave other retailers? The opportunity to compete with Amazon on Prime Day — or at least draft off their success — is enormous, analysts say. Last year, 40 percent of shoppers who spent money at Amazon on Prime Day also made purchases at competing retailers, according to management consulting firm A.T. Kearny.
“The reality is, Amazon has created another version of Black Friday and it would be foolish not to try to capitalise on that,” said Simeon Siegel, a retail analyst at Nomura Instinet. “Retail has been gifted a day where shoppers expect to make purchases. Do you stick your head in the sand, or do you say ‘thank you Amazon, which has created a day of purchase intent. Now how do I take part in that?’”
"Amazon has created another version of Black Friday and it would be foolish not to try to capitalise on that."
Prime Day has created a halo effect and shoppers are looking everywhere, not just on Amazon.
The number of retailers competing on Prime Day jumped from seven in 2015 to 194 last year, according to Michelle Skupin, who leads the research insights data team at RetailMeNot. Skupin anticipates over 250 retailers will offer promotions this year.
Amazon’s largest rivals have already announced they are hopping on board to compete. Target is planning “Target Deal Days” on the same days that Amazon is running its Prime promotions, and will offer 50 percent off products in its home, apparel, toy categories. eBay plans to go head-to-head with Amazon too with its “Crash Sale” of 50 percent off of select products on July 15, the name being a jab to Amazon’s site crashing during Prime Day last year. Walmart also plans to release thousands of deals and discounts and it will run these promotions longer than Prime Day, starting on July 14 and ending July 17.
They aren’t the only retailers stepping up, though. Over the last few years, companies including J.Crew, Express, American Eagle, Sephora, Macy’s, Forever 21, Home Depot, Dick’s Sporting Goods, The RealReal and Kay Jewellers ran competing sales promotions, and many will likely do the same this year.
To be sure, most, if not all of these competing retailers routinely match Amazon’s prices, and this hasn’t done much to stop Amazon from winning over some of their customers. By the end of 2019, Amazon will nab 52.4 percent of all e-commerce sales in the US, according to Feedvisor.
But that doesn’t mean brands can’t benefit from stepping into Amazon’s territory. Kohl’s, a department store chain, began processing Amazon returns at 100 locations last year and this week finished expanding the program to all 1,100 locations. The partnership is helping drive foot traffic to Kohl’s stores, and Chief Executive Michelle Gass said in a press release that the Amazon returns initiative is the department store’s “single biggest initiative of the year.”
Stepping into the ring on Prime Day has already proven to render positive results. Brands saw growth when they offered sales on Prime Day, according to data compiled by computer software company Jumpshot that was published earlier this week on DigitalCommerce360. Last year, for example, Target sold 156 percent more product on Prime Day than any other day in June; Macy’s sold 99 percent more products, and Best Buy sold 66 percent more. Research from internet advertising company Criteo found the fashion category as a whole saw a 41 percent increase in sales on Prime Day last year.
“What the data tells me is that it is absolutely worth it for retailers to compete during this time,” Skupin said. “The retailers who offer deals during Prime Day actually generate more clicks to their website. It’s a tide that raises all boats if you will.”
"The retailers who offer deals during Prime Day actually generate more clicks to their website."
Of course, competing on Prime Day also comes with concerns that too much discounting can hurt a brand. Amazon’s whole game is to offer the best price, and competing in such a battle would be futile when Amazon has more resources to stay ahead.
Siegel, of Nomura Instinet, however, said that the winning strategy isn’t necessarily to offer deals. The key is to be a part of the Prime Day conversation.
“The day may belong to Amazon, but what competitors have to do is figure out how to strategise from the consumer's perspective,” said Siegel. “It falls to the retailer or brand to figure out how to get a slice of the pie. It does not necessarily have to be a discount.”
Brands should capitalise on the buzz that Prime Day creates to get the attention of shoppers, said Alex Fitzgerald, a manager in the consumer and retail practice of A.T. Kearney. Discounts and sales work, for sure; but so do promotional emails that remind shoppers of brands they love.
Companies that sent emails to customers on Prime Day in 2018 saw an open rate that was 43 percent higher than other emails sent during the third quarter of 2018, according to research compiled by Yes Marketing.
Prime Day can also be used to launch and test new products since it’s a time shoppers are glued to the web.
“Brands should be leveraging their direct-to-consumer offering to get in front of shoppers,” Fitzgerald said. “Prime Day can be used to increase awareness that will serve their business in the long-term. It isn’t necessarily just about driving profits.”
Whatever the strategy is, analysts agree that the most important part of the game is to be in it, especially since Prime Day is now considered the opening of the back to school shopping season, according to Skupin — a time that earns retail about $82.2 billion, per the National Retail Federation. Amazon’s Prime Days are now considered the most important time to drive online shopping sales during the entire back-to-school season for 84 percent of retailers, according to a study by RetailMeNot, and parents surveyed said they plan to shop at an average 11 different retailers during Prime Day.
With Amazon being crowned the unofficial keeper of the back-to-school season, anyone not stepping in on Prime Day is getting left behind. As Siegel puts it, “anyone who works in an e-commerce operation should be eagerly anticipating Prime Day with a strategy.”