Will Prime Day give Amazon an insurmountable advantage online?

Discussion
Source: Amazon.com
Jul 11, 2017
George Anderson

No rival comes close to matching the sales produced by Amazon.com online. Chances are good that the advantage the e-tailer holds will grow even stronger after the conclusion of the company’s third annual Prime Day, which began last night at 9:00 ET (7:00 for Alexa shoppers).

Most reports see two key goals for Amazon this year: expand the ranks of its Prime membership program and drive sales of the company’s Echo, Fire and Kindle devices.

Building on its base of Prime memberships is key to Amazon’s success as members spend more on the site than non-members. Earlier this year in a filing with the Securities and Exchange Commission, Amazon reported $6.4 billion in retail subscription services (translation: Prime memberships). Recent estimates as to the number of Prime members in the U.S. stands between 65 million and 80 million.

Driving sales of its hardware is also key for Amazon as these very same devices are also used as platforms to make purchases on the site. Slice Intelligence reported that Amazon’s hardware devices accounted for 70 percent of the top 10 selling products during Prime Day 2016.

Amazon is offering significant discounts across its lines to drive volume. Amazon Echo, which normally sells for $179.99, is now selling for $89.99. The company’s line of Echo devices hold a 70 percent share of the voice-activated speaker market, according to eMarketer.

Other deals include the Fire HD 8 tablet on sale at $49.99, a $30 discount. Customers looking to make reordering easier can purchase Dash buttons for 99 cents instead of the usual price of $4.99, while still receiving a $4.99 credit on their first orders.

Slice projects that U.S. sales volume will be 20 percent higher than Prime Day 2016 due to higher per person spending and the six additional hours tacked on for the 2017 event. Last year, the average spend per buyer was 14 percent above 2015. The firm sees an opportunity to increase revenues by getting existing shoppers to make a purchase during the event. Last year, only 16.2 percent of past buyers on Amazon made a Prime Day purchase.

DISCUSSION QUESTIONS: How much stronger will Amazon be as a retailing entity coming out of Prime Day 2017? Where do you see the event making the most significant gains?

Braintrust
"How do we define a strong retailer? Volume or profit? Let's see how this Prime Day turns out."
"It’s funny to me to read so much here about profits. Haven’t we all figured out the new Wall Street model? Growth and market domination at all costs."
"What Amazon Prime Day shows is that Amazon is able to create a selling event that is bigger than any other retailer can build."

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20 Comments on "Will Prime Day give Amazon an insurmountable advantage online?"

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Paula Rosenblum
BrainTrust

Is anyone making any predictions on how profitable Prime Day will be? Good heavens, has the world entirely forgotten business fundamentals?

Art Suriano
BrainTrust

There is no doubt that Amazon continues to do many things right. They know how to expand their market by creating bigger and better offers and this year’s Prime Day is another one of them. I expect to see growth over last year and I would hope that other retailers continue to find ways to compete. Amazon isn’t right for everyone and there are many items customers still prefer shopping for in-store. But Amazon is becoming an unstoppable machine dominating e-commerce and now beginning to conquer brick-and-mortar. I don’t think they’ll put everyone else out of business, but the longer retailers sit back and do not invest in better in-store experiences with better-trained staff, the longer Amazon will continue to win.

Lee Kent
BrainTrust

Call me a broken record but I’m not sure how we come off calling a company a strong retailer when they still don’t make any money at it. Volume does not a retailer make and having another company to prop you up so you can stay in business? Well, I don’t know what we call that. Now don’t get me wrong. Amazon has done some great things. Great service and delivery. They have set many good examples in the use of technology and strategy. The Prime program and Prime Day? Stellar! But how do we define a strong retailer? Volume or profit? Let’s see how this Prime Day turns out.

But that’s just my 2 cents.

Phil Masiello
BrainTrust

What Amazon Prime Day shows is that Amazon is able to create a selling event that is bigger than any other retailer can build. Look at the press coverage this has gotten. Look at how consumers react and wait for it. That is the power that Amazon wields with the consumer.

This event puts Amazon in a position that no other retailer can recreate. They have now created their own version of Black Friday and Cyber Monday focused on one retailer.

In two years, Amazon has been able to achieve this. As they build upon this, over the next few years we will see consumers planning their purchase decisions around Prime Day.

Alex Hamilton
Guest

What matters about Prime Day is that, unlike Christmas, Easter or Thanksgiving, this is a festival that only members can join in with. What is also interesting is how Amazon is attempting to change shopping habits through Prime Day, via cut-price offers on voice tech tool Echo and “one-press” ordering Dash buttons. In short, Prime Day = Amazon’s opportunity to expand its ever-growing ecosystem further.

Celeste C. Giampetro
BrainTrust

I agree, Alex. What Amazon gets out of it will be IMHO more data to feed their rapid-fire testing machine. I’m a Prime member but I didn’t receive a single notice about today — over email or otherwise. If I wasn’t in marketing, I may have never heard of it and I visit Amazon a good amount. More marketers should embrace testing and iteration a la Amazon. The first year they launched this effort it did fail so now presumably they’ve taken those learnings and iterated to meet their Prime customer needs. Sounds like data-driven decisioning and smart marketing to me.

Adrian Weidmann
BrainTrust

Remember the old SNL banking sketch? If a customer wants change for a $20 bill, we can do that — one $10, one $5 and five singles.

How do you make money? … volume. These events certainly draw international attention but you still have to make money. Oh yeah … volume!

Gene Detroyer
BrainTrust

It occurred to me a few weeks ago and I noted in these pages that Amazon is not a retailer. Amazon is a mall without real estate. Much more than a trip to any single retailer, a trip to Amazon reflects a trip to the mall.

Understanding that, we see Amazon’s clear strategy. Increase mall traffic by any means, particularly Prime. Make Amazon the “go-to” place when you want anything from toilet paper to a new computer to a movie to a meal delivered from a local restaurant, et. al.

Richard J. George, Ph.D.
BrainTrust

Amazon is the 800-pound gorilla that currently dominates the retail landscape. Its influence on retailing is similar to that enjoyed by Walmart in the late ’90s and early ’00s during its Supercenter heyday.

Two obvious benefits from Prime Day are massive amounts of PR and the increase in the number of Prime members. A third benefit is the pressure this places on the competitive array. Amazon Prime days put the competitors on the defensive, forcing them to disclose their actions, if any, to counteract the actions of Amazon.

I would not bet against Amazon.

Sterling Hawkins
BrainTrust

I wouldn’t bet against Amazon on Prime Day, but no retailer is infallible. There are other ways to compete that give retailers a shot rather than going directly head to head. The Walmart analogy is a good one as they seemed invincible in the late ’90s and today they’re closing stores and looking for what is next.

Al McClain
Staff

What I wonder, Sterling, is how many directions Amazon can go in at once, before they become so much of a conglomerate that they lose focus? Not saying they will, but it amazes me how many new projects they announce. Almost daily, it seems.

Lee Peterson
BrainTrust

It’s funny to me to read so much here about profits. Haven’t we all figured out the new Wall Street model? Growth and market domination at all costs, profits be damned. Profits? Who cares? Profit is sooooo 1990s!

On the serious side, Prime Day, Alexa, Dash, drones, same-day delivery, Whole Foods, Prime membership … it’s not just one thing that makes Amazon great, it’s all of the above.

Al McClain
Staff

Lee, I’ve also noticed that the comments questioning Amazon’s ability to make a profit seem to be getting a lot of thumbs down votes. Wondering if maybe we have some Amazon investors reading the thread.

Phil Masiello
BrainTrust

Al, I think the reason you are seeing thumbs down on the profitability is that it is false news. Amazon absolutely makes a profit on selling goods. Even without AWS. Amazon generates a ton of cash as well. Most retailers today should be so lucky as to be as unprofitable as Amazon. Their operating cash flow in 2016 was $18 BILLION. They have had 16 straight quarters of rising profits. Again, even when you take away AWS, which is ridiculously profitable.

Ricardo Belmar
BrainTrust

Phil, I think you nailed this one. At the end of the day, it doesn’t matter if we include AWS profits or sales in the discussion or not. Amazon is a retailer that refuses to think and act like a retailer. They realize their business isn’t retail, it’s about satisfying the customer — no matter what the customer wants, cloud services, books, media, electronics, groceries, etc. When measured as a straight business, not a retailer, Amazon’s numbers reflect that success.

Ed Rosenbaum
BrainTrust

You have to give credit and praise where it is due. Amazon has certainly earned both. As soon as we hear the name Amazon, we stop and take notice. Whatever they do, they draw attention. Today will not be an exception. They could break all previous records. No other company comes close, not Walmart and not Target.

Manish Chowdhary
Guest

With or without Prime Day 2017, Amazon will continue being a leader in the online retail community, no doubt there.

Since Prime Day is only available to Prime subscribers, that alone will drive subscriptions.

The Prime Day discounts on the Echo devices, Dash buttons, and Fire devices will continue to create a growing presence in consumers everyday lives. Amazon is making it easier to purchase with these devices by making them a part of your surroundings and making Amazon part of everyday life.

It will be interesting to see the numbers from Prime Day 2017 and to see what Amazon comes up with for 2018.

gordon arnold
Guest
A close look at e-commerce development and growth will disclose interesting market trends and health. Amazon is evolving into a company that is forced to face consumer retention issues — not to maintain growth, but to maintain an ever growing mandatory revenue supply that can make minimum payments on debt. Are the banks and investors in too deep to start backing out? Sure looks like it to me. And if they did, how much of the stock market would see short sales to cover loses? You might want to sit down for that answer. Amazon isn’t alone in this struggle to survive without profit taking from the core business and like the companies along side them, the problem is over reliance on aging and obsolete technologies and marketing methods. Retail of any and all kinds will continue with or without Amazon and others. The Information Technology market turns the most creative and powerful products and services into buggy whips and beepers at light speed. This is a tradition and not the current trend which if forgotten will remove any company of any size in a few short years. As for growing the company Prime and Prime Day simply aren’t doing… Read more »
Ricardo Belmar
BrainTrust

I’ve said it before, but, name any other retailer who can create a members-only event of such epic proportions as Prime Day and cause every media outlet there is (both inside the industry and out — how many of us have watched CNN and CNBC covering Prime Day today?) to talk about it. Once again, Amazon speaks, we listen. Not only do we listen, but we analyze it like crazy! That’s quite an accomplishment for ANY business, let alone any retailer. We all know Walmart, Target, or nah other couldn’t do this and get the same level of attention. Yes, Amazon will break records this Prime Day and yes they will come out of it stronger. But not just a stronger retailer, a stronger business. Perhaps Jeff Bezos was the only retailer listening to Richard Branson at NRF when he told retailers to stop thinking like retailers!

Min-Jee Hwang
BrainTrust

Amazon will come out of Prime Day stronger in correlation with the new number of paying Prime members gained. Retails have responded with their own anti-Prime Day sales, and consumers are now spending more money during a time where sales were typically lower. In essence, the event has created a a new mid-summer retail holiday. Although it has increased competition, it has increased retail sales as well.

wpDiscuz
Braintrust
"How do we define a strong retailer? Volume or profit? Let's see how this Prime Day turns out."
"It’s funny to me to read so much here about profits. Haven’t we all figured out the new Wall Street model? Growth and market domination at all costs."
"What Amazon Prime Day shows is that Amazon is able to create a selling event that is bigger than any other retailer can build."

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