Amazon Wins Big Again on Prime Day

Faux holiday Prime Day 2017 was another huge win for Amazon as its biggest sales day ever, especially of its own devices, while it saw the biggest one-day gain in Prime membership, already at an estimated 85 million U.S. members.

Prime Day pulled in $1 billion in revenue, based on separate estimates from Cowen & Co. and JP Morgan Chase, according to Bloomberg, triple Amazon’s average daily volume in 2016.

Amazon said that sales on Prime Day were up 60% compared to the same 30-hour period in 2016; the event was extended by six hours this year. Its Echo Dot voice-activated device was the biggest seller and no wonder – it was promoted endlessly, featured on the company’s main page and sold at 50% off its normal price.

In terms of price matching, Walmart.com and its ancillary Jet.com came closest to Amazon on Prime Day, according to Market Track as reported by CNBC, but didn’t come close to matching all Amazon’s prices and had some items priced significantly higher.

Experts said Amazon’s main focus with Prime Day this year was its Alexa line of smart speakers – Echo, Amazon Tap and Echo Dot – in order to add more voice-activated, ecommerce-enabled hooks into the home.

“Last year it was great promotions of Fire TV devices, and this year it was Echo devices at half prices, as well as Alexa-enabled tablets,” said Josh Lowitz, partner and co-founder of Consumer Intelligence Research Partners (CIRP), which came up with the estimate of Prime membership. “In the lead-up to Prime Day there were lots of email promotions to get people with an Echo prepared to use it to shop. And the pricing suggested they’re even more committed to getting Echo into more houses.”

Amazon offered some early-bird deals ahead of Prime Day via Alexa devices as a further enticement.

Stefan Weitz, executive vice president of advanced technology for Radial, said the company’s major retail clients saw a 318% increase in sales on their Prime Day deals compared to the average Tuesday in June, while one client (GNC) saw a 5x boost. But Weitz said taking part in Prime Day – either directly or through coinciding promotions – can be a “dangerous game” for retailers if their execution is less than flawless.

“You’re not just competing against Amazon on price, and they’ve been known to take tiny margins to gain share,” Weitz said. “Even if you attract buyers to your site, if they also bought a product that day from Amazon, the contrast between them and the average retail experience would be stark.”

According to Feedvisor, which does algorithmic re-pricing for ecommerce sellers, the biggest increase in Amazon sales on Prime Day, compared to two weeks earlier, occurred at 4 a.m. on July 11, when it was up 221%. Feedvisor compared sales on 132,000 items on Amazon against the June date. The largest volume of sales on Prime Day, according to Feedvisor, was at 10 a.m. on July 11.

Hitwise, a provider of audience insight tools, said 9.5 million transactions were processed on Prime Day at Amazon.com, outpacing both Cyber Monday and Black Friday of last year. On July 10, 5.2 million transactions were processed on the site, up 45% from 3.6 million on June 26, two weeks earlier, Hitwise said. The conversion rate on Prime Day was 10%, according to Hitwise’s data.

Mehdi Daoudi, CEO and co-founder of digital monitoring platform company Catchpoint Systems, said except for a slight glitch between 9 p.m. and 10 p.m. on July 10 – when Prime Day kicked off – Amazon’s checkout process ran smoothly as millions of transactions flowed through its back end. There was some slowdown in search times, however, running about 30% slower than normal.

“Considering the extra load, with everyone checking on the hour for a new gadget to buy for 50% off, and the extra weight of pages from all the images and videos, they did a very good job which is what is expected from Amazon,” Daoudi said.

Comparing Amazon’s approach to a successful chain of health-oriented grocery products, Daoudi said the juggernaut appears unstoppable.

“Amazon is now largest seller of apparel online, and it’s the Trader Joes model in a way,” he said, referring to that chain’s successful practice of sourcing popular products and white-labeling them as its own. “Moving beyond Amazon Basics in electronics, they could start doing it in other merchandise categories. The buyout of Whole Foods could potentially give them the same kind of platform as Trader Joes.”

James Thomson, a partner in Buy Box Experts, a company that helps brands sell more on Amazon, compared the seller experience on Prime Day to a headliner vs. undercard acts at an outdoor rock festival.

“This is year three, and I see a lot brands that don’t understand this (Prime Day) is not about them,” Thomson said. “It’s like going to a music festival where there’s just one main stage, and Amazon is on it. You can build as many secondary stages as you want but they still control what goes on at the main stage. Brands don’t understand they’re not invited.”

Thomson said Amazon is “happy to have you foot the bill” for Prime Day by paying for advertising on its site and giving Amazon a cut of the sales. “All the discounts cost the brands but it doesn’t cost Amazon anything. At the end of the day they’re paid whether you make money or not. The more they invite, the bigger the party, even though it’s a lower-margin day for most brands.”

Advertising on Prime Day has gotten more expensive as the event has grown, and become more of a necessity for brands to try to stand out on an extremely noisy occasion. “There are too many products for any customer to thumb their way through, so if you want your deal to have any meaningful traffic it’s not enough to just put it up there – you need to supplement it with Amazon advertising,” Thomson said. “So you have to be prepared to spend far more on that than on a normal day.”

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