Photo: Amazon
Does Amazon need a great Prime Day now more than ever?
Amazon.com is holding its Prime Day event on July 12 and 13 with promises of offering its lowest prices ever on select products from its own lines and those of top brands.
Prime Day 2022 is different from previous events, however, because it comes after a quarter for which Amazon reported seven percent year-over-year sales growth, its smallest increase in two decades, according to a Wall Street Journal article. Amazon, during the first three months of the year, also posted its first loss in seven years as a result of higher costs and ongoing supply chain disruptions tied to the pandemic.
This year’s promotional event also follows the departure of Dave Clark, CEO of Amazon’s consumer business. Mr. Clark, Amazon’s former head of logistics who moved into the consumer role in January 2021, led an unprecedented hiring spree and accelerated the spread of Amazon’s warehouses to meet surging demand during the pandemic. When online sales growth slowed, during the first quarter, however, Amazon found itself in an overcapacity situation, resulting in $6 billion in incremental costs in the first quarter. It is estimated the tab will be $4 billion in the second quarter.
Amazon, for its part, is looking to build anticipation around Prime Day 2022 with promises that this year’s promotion will feature a greater selection of brands and products than before. The promise of great deals is likely more important than ever to the event’s success considering the pressure that consumers are feeling from inflation that is tracking at the highest level since the 1970s.
The retail giant is looking to build momentum leading up to the two-day event with deals on Amazon devices, Fire TV smart TVs and a 20 percent discount on select products at Amazon Fresh stores.
Prime members who make purchases with their Prime Rewards Visa Card can earn six percent back shopping at Amazon and Whole Foods Market.
Amazon is also offering a buy now, pay later option. Prime members can make purchases between June 28 through July 11 and pay for what they buy in three equal monthly installments at zero percent interest.
“We’re making it simple for members to find the best deals, from personalized deal recommendations to Alexa reminders. It’s never been easier for Prime members to shop, save, and make the most of Prime Day,” said Jamil Ghani, vice president of Amazon Prime, in a statement.
- Save the Date: July 12 & 13 — Prime Day Returns Offering Amazon’s Lowest Prices Ever on Select Products – Amazon.com
- Amazon.com Announces First Quarter Results – Amazon.com
- Amazon Posts First Quarterly Loss Since 2015 as Costs, Rivian Stake Weigh on Results – The Wall Street Journal
- What will Dave Clark’s exit mean for Amazon’s retail business? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you think there is more pressure on Amazon to have a great Prime Day in 2022 than there has been in years past? What will be the keys to success for Amazon and other retailers running promotions between now and July 13?
Poll
Loading …BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Dion Kenney
COO, Mondofora
Yes, this year’s Prime Day is especially important for Amazon. With new leadership, and slowing sales, the online juggernaut is looking to show strong results in a market that is facing historic inflation with consumers under tremendous pressure. Amazon’s Prime Day playbook is well established, so the big question is: will consumers respond?
Most definitely. With so much change that Amazon is experiencing, a successful Prime Day is needed to help shore them up. I am curious if they will go scorched earth to help move inventory. Time will tell.
After extensive sales gains during the pandemic, Amazon’s retail business stalled. Some of this is a consequence of lapping very tough comparatives, but some is also the consequence of a more pressured consumer cutting back on impulse buys. While I would not write Amazon off and believe it can get back to good growth eventually, it really does need a strong Prime Day to boost its quarterly results and show it can get back on track quickly. The comparative for next quarter is less onerous, but it still represents a mountain for Amazon to climb.
They really do need to show something on the bottom line, too.
I think we have to look back to the origins of summer sales. They were designed to get people off the beach and into stores. Theoretically, Prime Day allows you to buy right from the beach. But there are a lot of headwinds here and I think unless the deals are “insane” (to quote Crazy Eddie) people will be more likely to wait and see what happens to the economy.
Also, it’s worth remembering that Amazon doesn’t drop a ton of money to the bottom line with Prime Day. I seem to recall they lost money for the quarter Prime Day was in last time.
So what’s really important is both top and bottom lines, and I suspect shoppers will be cherry picking.
Pressure or no pressure, it’s not going to be an easy trick to pull off.
I do think Amazon needs to rebuild some momentum, and I certainly think there is more pressure for a strong Prime Day this year. I suspect that competing retailers will apply their own pressure on Amazon and “kick them while they are down” with compelling offers and promotions at the same time. We saw a big move by others last year, and I suspect we will only see more this year.
Compared to the past two years, there is more pressure for Amazon to rock Prime Day 2022. Now more rivals are digitally mature, profit margins are tight, and consumption is shifting to entertainment and travel.
Fortunately, excess inventory will lead to generous discounts for Prime Day and concurrent events. Key success factors include the availability of popular items, deep discounts across categories and fast delivery.
PROMOTION! Years ago, there was a promotion on the Chicago television networks. The spot simply featured a picture of a mountain. And a booming voice would announce this message: “I’M BRINGING A MOUNTAIN TO CHICAGO.” That was it. It drove people nuts. Everyone was talking about it. And a month or so later, “Mountain Grown” Folgers coffee entered the Chicago market. I think Amazon needs to build an event of teasers and hints, that all their talented marketing experts can generate to get people jazzed and talking about it. I know they do great loss leaders, and that is incredibly important. But this big event needs big promotion to stand out and attain sales goals.
Amazon is certainly having a rough time these days. Its current leadership is trying to bring the retail division to a more self sustaining level of profitability without the need for funds from AWS, which has only brought to light the inherent weakness of an e-commerce only retail model. They have failed to develop the brick and mortar network that would help them better optimize profits, making them vulnerable to unwanted investor attention as the true weight of their operational costs comes to light. A great Prime Day would certainly give them some much needed positive news cycles, but won’t change the fact that they need to shore up their omnichannel capabilities if they want the retail side of the business to become less dependent on help from AWS.
Considering Amazon’s omnipresence in the e-commerce fulfillment space, one could argue that Prime Day is every day. However considering the retail team’s leadership shifts, the global supply chain disruptions, rising levels of excess inventory, rising inflationary rates, diminishing consumer confidence, and an overall reduction in customer spending, this year’s Amazon Prime Day is becoming increasingly important.
It will be interesting to see what aggressive promotional planning will go into this Prime Day to help drive sales. Amazon will have a delicate balancing act to consider, as the rising operational costs and sales promotions will eat into their bottom line. Prime Day may prove to be a loss leader. However the ultimate goal for Amazon is each customer’s lifetime value, not what they spend during a single-day sales event.
No question that Amazon needs to do GREAT for Prime Day this year. With a slowing sales trend, sluggish subscription service revenue compared to last year, and online sales dropping 1 percent for Q1, Prime Day needs to be a winner in sales, profit and new memberships. The most important factor for Amazon is demonstrating to its Prime members the value-add of being a Prime member. Prime Day allows Amazon to gain more subscribers just in time for the holiday season.
While I feel that Prime Day is a good metric for gauging Amazon’s strength, I am going to take a contrarian position today. Prime Day has really been a metric for measuring the general public’s acceptance of online shopping, particularly by comparing it to Black Friday retail numbers. At this point in time, the general public is comfortable shopping online and no longer needs a specific online shopping day in the form of Prime Day, or the comparative performance of Prime Day vs. Black Friday sales. As a consequence, we’ve been seeing the Prime Day sales figures spreading over a longer and longer period of time, to the point of the “day” aspect of Prime Day extending over a two to three week period. If Amazon continues to measure their performance based on this one day’s sales figures, they will be observing a decreasing metric in what is actually a period of healthy e-commerce growth.
The pressure for profitability has to be as great, if not greater, than the pressure for growth. With Amazon’s current market share, is growth really the priority? Or is it past due to demonstrate retail profitability (vs. advertising profitability)? Macy’s showed us growth for a while, with a bunch of one day sales. And it changed the character of their business. If I were Amazon, I’d be more concerned with the status of their proprietary labels. Where is Amazon’s version of Kirkland? The brand that is a go-to for quality and value? How does Amazon use these highly visible Prime Days to build the profile of their owned brands?
Prime Day will always be a significant retail promotional event for Amazon since it sets Amazon apart for other retailers. By offering major Amazon products and branded products at discounted prices, Amazon has the ability to categorically manage sales and inventory from their warehouses in a way that other retailers cannot. Best yet, it allows Amazon the chance to sell more Prime memberships, which is key to Amazon’s profits for each future quarter.
Success eventually begets unrealistic assumptions — I hesitate to call it “pressure” — and this may be the year that underperformance happens; or not. I’m not fond of contrived “events,” and honestly my impulsive reaction is to ask what I would ask an adult (who every year makes a big event over their birthday): “aren’t you a little big for this?”
Prime Day is always important for Amazon in any year, but there will be more people watching the results as a leading indicator for retail going into the second half of the year. I’ll be extremely interested to see what other retailers do to jump on the Prime Day bandwagon as Target is doing with their Deal Days to see what they can do. Many retailers will be looking to this event to offload all that excess inventory we’ve heard about in so many recent earnings calls. The unanswered question is, are consumers looking for deals in July? Or are they trying to save their dollars and avoid spending?
There is a definite slowdown in online commerce as we get to a post pandemic state. Amazon is not immune to this as well and needs to make moves to counterbalance this with a strong Prime Day this year. The other retailers need to also follow suit to bring customers back to online as stores reopen and other options like travel and leisure take back wallet share.
Prime Day is a regular “sale” event for Amazon. The key is for this to be as good, if not better than before. Customers expect big things out of Amazon, and hopefully they will deliver. (They usually do!)
For any retailer running a promotion, make sure it’s in line with what your customers want. I’ve seen a lot of money wasted on lame promotions.