Amazon’s Announcement

On July 12, Amazon announced that its third annual Prime Day shopping event was the biggest day in Amazon history in terms of revenue, with sales surpassing those of Black Friday and Cyber Monday. In 2017, Prime Day actually started at 9:00 p.m., PDT, the day before and ran for a total of 30 hours. Amazon made comments that suggest the following:

• Total orders grew by more than 60% over the corresponding 30-hour period last year.
• Tens of millions of Prime members made purchases, and their orders increased by 50% year over year.

As a reminder, these figures build on those from last year’s Prime Day: Amazon reported that orders grew by 60% worldwide on Prime Day 2016 and by more than 50% in the US. Amazon’s consumer electronics products were heavily discounted, and the company commented that the Echo Dot was the best-selling Amazon device as well as the best-selling device by any manufacturer. The price for the Echo speaker was reduced to $89.99. Sales of other Amazon devices such as the Echo, Fire tablets and Kindle e-readers also set records. Amazon’s deal for the Element 55-Inch 4K Ultra HD Smart LED TV was the best-selling TV deal in Amazon’s history. The table below lists the top-selling products by country/region.

Source: Amazon

What It Means

In addition to serving as a means to drive sales during the summer doldrums and possibly close out some slow-selling products, Amazon Prime Day is also a clever way to get new customers to sign up for Prime membership. Prime members are a key driving force behind Amazon’s spectacular growth. They are likely less price sensitive than nonmembers (as they are placing Prime orders so as to “get their money’s worth” for their $99 annual subscription) and they spend $1,300 annually, versus $700 for non-Prime members, according to Statista. The graph below shows the estimated number of Prime members, according to Consumer Intelligence Research Partners. The firm estimates that there were 80 million members in March 2017, up 38% from 58 million a year earlier.

Source: Consumer Intelligence Research Partners

Estimates for Amazon’s revenue during the 30-hour Prime Day period ranged from $1 billion (according to Cowen, J.P. Morgan and others) to $2.2 billion (according to Internet Retailer). The $1 billion figure is three times Amazon’s average daily sales, according to Bloomberg.

Comparison to Other Shopping Holidays

Although Prime Day reportedly generated greater sales for Amazon than Black Friday or Cyber Monday did, it is much smaller than other recently invented shopping holidays. For example:

• Alibaba’s Singles’ Day festival on November 11, 2016, generated total gross market value of $17.8 billion.
• com’s annual shopping festival generated sales of $17.6 billion during the first 18 days of June this year.

Other Retailers’ Responses

Other retailers responded to Prime Day with deals of their own:

• Best Buy offered up to 40% off major appliances through July 12 and $500 off Samsung 4K televisions.
• Google offered its Google Home speaker and Chromecast streaming device for $99.99 on eBay.
• Macy’s advertised up to 60% off “everything summer” on its website.
• Sears announced a “Summer Splash” promotion, offering online-only deals on products such as kitchen appliances and women’s jeans.
• Toys “R” Us offered 20% off everything on its website.
• Walmart offered deals on electronics, including drones, phones, tablets and televisions.

Conclusion

Amazon Prime Day serves as a clever marketing event that draws attention and adds members to its Prime program in the middle of summer, when consumers are more likely to be thinking about summer vacations than shopping. The greatest discounts were on Amazon’s own consumer electronics products, which use Amazon content and offer features exclusively to Prime members. These members are extremely important to Amazon, as they are relatively price insensitive and spend nearly twice as much on Amazon annually as non-Prime members do.