Prime Day Fail: What Merchants Need To Know
Today marks the second annual Amazon Prime Day -- a sales event created by the ecommerce giant to drum up a revenue boost during the summer months and test the market for the upcoming holiday season. Despite some entertaining customer ridicule in its first year, Amazon’s plan was quite successful, as the company saw an additional $400 million in revenue compared to a standard day of sales and 179 million visitors on the site is nearly twice the usual traffic, resulting in a net sales spike that was 18 percent higher than Black Friday 2014.
For merchants, Prime Day’s traffic spike is a huge opportunity to capture new customers and clear dated inventories before the holiday season. Before throwing resources toward the event, I advocate that sellers consider common pitfalls that, if overlooked, could impact their reputation with customers and ultimately hurt their bottom line.
Are you afraid of missing out?
No one wants to feel like they are losing out, particularly when a healthy profit is on the line, but blindly following the hype is dangerous for independent sellers. Before committing significant resources to an event like Prime Day, it is important to analyze the risk and reward for your business. Are you able to support the spike in orders and deliver on your customers’ expectations of two-day delivery? Can you handle the increase in customer service requests that will follow a high volume of sales? Do you have the staff to support the hectic 24 hours?
Letting FOMO (fear of missing out) override rational, calculated decision making can leave your business exposed to a host of avoidable issues, from disgruntled customers, to overworked employees, to drops in your overall seller rating.
Throwing away money.
Online retailers like Amazon and eBay charge a standard 15 percent commission that merchants calculate as they would any standard cost of doing business. Yet costs become more difficult to track when a seller is frequently tapping into an international customer base. Anytime money crosses a border, a foreign exchange margin of "up to 4 percent" is added to the transaction’s value.
For a successful international merchant, an otherwise successful Prime Day could end up costing them thousands in unanticipated fees -- $1 million in business revenue could equate to $40,000 or more in cross-border fees -- a significant amount when working with the razor-thin margins that online sales dictate. There are ways to be smarter about your online presence to bypass those 4 percent, such as using a foreign exchange specialist for example and thinking strategically about your approach to currency exchange would reduce costs.