What Prime Day Means for Amazon and Other Ecommerce Brands
To celebrate its 20th birthday, Amazon has officially declared July 15 "Prime Day" an event that will offer more deals than the traditional Black Friday. And while Prime Day could offer customers some pretty generous deals, business experts and savvy entrepreneurs know Amazon's goals run much deeper than rewarding shoppers with hefty discounts.
Amazon wants you to meet Prime Day
In a July 6 press release, Amazon officials made it very clear that their new Prime Day wouldn't just rival Black Friday -- it would surpass it. (The title of the release reads "Step Aside Black Friday – Meet Prime Day.") The highly-touted sale, which will offer deals to Prime members in various countries (U.S. included) and will start at midnight on July 15, with new deals being released to shoppers every few minutes.
"Prime Day is a one-day only event filled with more deals than black Friday, exclusively for Prime members around the globe," Greg Greeley, Vice President of Amazon Prime, says in the release. But notice what he says next. "Members tell us every day how much they love Prime and we will keep making it better." But that's not all. "If you're not already a Prime member, you'll want to join so you don't miss out on one of the biggest deals extravaganzas in the world."
While it may seem like a prototypical, unassuming soundbite for an important press release, Greeley shows the true motivation behind Prime Day: Build the Amazon Prime program and surpass the competition.
Amazon's greatest asset: Prime
It doesn't take much digging around or number crunching to understand how profitable the Amazon Prime program is for the company. According to data from Consumer Intelligence Research Partners, 45 percent of Amazon customers in the U.S. have Prime (40 million-plus members). On average, Amazon Prime customers spend $1,500 per year, compared to only $625 for non-members.
So not only does Amazon collect $99 per year from Prime Members but they're essentially doubling their per-customer profits every time a member pays to sign up for the program. As a result, it only makes sense that Amazon would seek to grow Prime beyond what it already is.
In the past few months, Amazon has already put an emphasis on growing the service by releasing Prime Now, free same-day delivery options and Prime Music. Prime Day is just another savvy catalyst for growing membership numbers.
While the company may take small profit margin hits by offering large discounts on certain SKUs, the ROI will ultimately be much greater. By allowing interested customers to start their free 30-day Prime membership on Prime Day, Amazon knows it'll be able to attract and keep a fair share of new members. While customers may save $50, $100, or even a few hundred dollars on July 15, they'll ultimately double their annual spending and Amazon walks away as the real winner.
Overcoming the competition
While the lure of adding new Prime members may be the ultimate focus of Prime Day, it's also clear that Amazon is putting a major emphasis on overcoming competitive threats -- in both physical retail and ecommerce.
The official press release places a big emphasis on Amazon's intent to surpass Black Friday and Cyber Monday as the ultimate one-day shopping experience for customers around the world. While Amazon has notoriously good prices and does occasionally offer flash sales, business insiders have often wondered what Amazon would eventually do to combat the popularity of these traditional annual sales. Well, they may finally have their answer.
While it doesn't come in the middle of the holiday shopping season (Amazon doesn't need much help increasing sales during this time of year), stating the site will have more deals than Black Friday shows the company's clear and logical desire to show consumers that ecommerce can compete with physical retail sale prices.
But what about e-commerce competitors? Could Prime Day be partly-fueled by Amazon's desire to further drive its stake into the ecommerce landscape? In an article for Time.com, Chris Neiger of The Motley Fool brings up this precise point.
"Aside from celebrating its birthday through its popular membership service, I think there's something else going on with Prime Day, and it has to do with Amazon's upcoming competitor, Jet.com," Neiger writes. If you're unfamiliar with the reference, Jet.com is a members-only deals site that's currently in the beta stage and is expected to launch later this year. The selling point is that items on the site are five to six percent less than they are on Amazon. And because Amazon is familiar with Jet.com founder Marc Lore -- who launched a company that rivaled Amazon's diaper sales and was ultimately purchased by Amazon for $550 million -- they're taking the threat very seriously.
"Amazon is a fiercely competitive company and taking this step gives it the advantage of offering new value to its existing customers, while giving potential Prime customers access to great deals," Neiger concludes.
What Prime Day means for ecommerce
Ultimately, as a business owner, entrepreneur or online shopper, you're probably wondering what Prime Day means for you. Will Prime Day have a lasting impact on the ecommerce industry and how far will the reverberations extend? It's certainly a valid question and one that will be interesting to follow up with after July 15.
One thing is for sure, if Amazon experiences anything similar to Alibaba's Singles Day promotion last year -- in which the company reportedly sold $9.3 billion in goods -- this won't be the last Prime Day. The question is whether Prime Day (or July 15) will become a much larger deal holiday? If it proves successful, other ecommerce sites are going to be interested in trying their own massive deal days. Would they launch independent deal days or would ecommerce sites band together for something even bigger and greater than Cyber Monday?
There's plenty of excitement and no shortage of questions in the hours leading up to Prime Day, but one thing is for sure: Amazon is making, yet again, a savvy business decision that further establishes the company as one of the most progressive and profitable brands in the world.
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