Since the inaugural event in July 2015 as a celebration of Amazon’s 20th anniversary, Amazon Prime Day has become a global retail phenomenon. Initially launched in only nine countries and then a 24-hour event, Amazon Prime Day now reaches more than 20 countries and lasts 48 hours.
The company reports that the 2022 event saved consumers over $1.7 billion globally, and sold over 300 million items. In the US, Adobe Analytics reported an increase of domestic retail sales during the Prime Day event of 8.5% to $11.9 billion.
Amazon Prime Day is an outlier in the context of large-scale retail events because it is entirely manufactured by one company. Other significant events, such as Christmas sales, Black Friday, or Cyber Monday, are led by national or cultural trends. After twenty years of growth to become a dominant global retailer, Amazon was in a position to create its own signature retail event.
Since 2015, Amazon has seen Prime Day grow, year after year, into an essential part of the global retail calendar. So far, only the global Covid pandemic has presented any challenge to Prime Day, by forcing the date to change from July to October.
The Real Goal of Amazon Prime Day is Customer Loyalty
Although the event is a huge driver of retail sales, particularly electricals, the main purpose of Amazon Prime Day is to drive customer loyalty. It achieves this goal in two ways; firstly, the extensive marketing around the event encourages non-members to sign up for the exclusive benefits, and secondly, it acts as a reminder of the value and benefits that existing customers already have.
Exclusive events and rewards drive a positive brand perception for new and existing customers, and this virtuous cycle creates a loyalty moat which presents a genuine challenge to competing retailers.
How Amazon Benefits from Prime Day
Increased numbers of product sales and increased revenue are only a part of the rewards Amazon receives through its Prime Day events. Simple sales numbers can boost retail market share, but the benefits to Amazon go much further.
In recent years, Amazon has made a special push to engage with smaller businesses and ensure they are not overshadowed on the platform by large brands. Prime Day is also an opportunity for Amazon to push its growing range of own-label products. These include the popular Amazon Basics range, as well as in-house brands covering everything from fashion to health.
Additionally, the insights Amazon gains from the data produced by Prime Day shopping can feed into ancillary services and new marketing opportunities as Amazon is able to collate data from its customers across a range of services, such as Prime Video subscriptions and Kindle reading habits to better personalise targeted digital advertising and find opportunities for own brand and private label products such as the Amazon Basics range, to in-house clothing brands like Core 10.
How Amazon Partners Benefit
The benefits of Prime Day go beyond Amazon’s own ecosystem and into the wider sphere of retail operations through Amazon’s business partners.
Over the years, Amazon has evolved into something much greater than a simple online retailer. When reporting the financial success of Prime Day, it’s often overlooked that while Amazon records billions in sales, a large volume of this goes to third-party retailers who are taking advantage of Amazon’s sophisticated marketing, logistical, and payment processing operations.
Shipping and logistics businesses benefit from increased demand to ensure the right products are ready for local distribution. Likewise, local deliveries also benefit from the increased volume of business during the Prime Day event.
The uplift across the wider retail market also has a direct benefit for payment processing firms. Traditional credit cards, as well as more recent entrants such as PayPal and Stripe, as well as Apple Pay and Google Pay, all take a small cut of every payment, so they benefit from increased financial activity around Prime Day.
How Amazon’s Competitors Respond to Prime Day
Such a powerful retail event was, of course, eventually going to lead Amazon’s competitors to take notice. Within a couple of years, other retailers, brands and online shopping platforms were jumping on the bandwagon. In the US, Target has launched Target Circle Week, and global online retailers like eBay have offered summer sales, along with other big retail brands such as Walmart. Online beauty retailing has also worked to capitalise on these annual promotions with brands such as Sephora and Ulta following suit.
Research suggests this tactic is working. Non-Amazon retailers sometimes showed higher annual sales growth than Amazon over the Prime Day period in recent years.
What We Think
Amazon has seen phenomenal success since it launched the first Prime Day in 2015. Amazon’s ability to capitalise on an already-receptive audience thanks to Prime subscriptions has cemented the perception of exclusive retail savings among its core customer base.
The company has also been able to drive this success through integration among its varied business areas, drawing more value from data, logistics, and marketing.
The challenges the firm now faces are internal and external. Increased competition from other retailers could threaten Amazon’s future growth, while market saturation of Prime membership subscriptions is also a risk to their lofty ambitions.
Additionally, with subscription services gaining in popularity in all areas, Amazon faces the problem of long-term customer loyalty. If Prime Day benefits can be had in the short term from a single month’s subscription fee, Amazon will have to work harder to prove the value of a long-term commitment.
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