Amazon Prime Day has surpassed Black Friday as the tech giant’s biggest shopping event of the year, but by creating a new shopping holiday out of thin air, Amazon is also giving its top competitors more business during what can be a slow season.
Amazon has promised this year’s Prime Day event, beginning at noon today and lasting 36 hours, will be the biggest yet. But it’s not just Amazon offering blowout sales this week. Walmart, Target, Best Buy, Macy’s, Nordstrom and more are offering their shopping own slate of sales, touting “Black Friday in July” discounts on items such as big-screen TVs and other electronics, apparel and even deals on months of same-day delivery for customers who spend a certain amount.
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Adobe Insights found that large retailers saw a 35 percent jump in sales on Prime Day 2017 over the previous year. Adobe expects new records for this year’s Prime Day period following a huge quarter for online sales growth and the first-ever $50 billion online back to school shopping season.
Many retailers go from the red to the black for the year on Black Friday, so the conventional wisdom would say another massive shopping holiday is great news for the industry. Despite the positives of another major event for big retailers, everyone else is faced with the prospect of not getting in on the sales bonanza or taking little to no profit on many items.
“Given the ongoing price war between Amazon and Walmart across multiple categories, and the ripple effects creating collateral damage for others, we see the industry caught in the throes of ‘Retail Darwinism,’ which is a credit negative for mostly all but the largest, higher credit quality retailers,” Moody’s writes in a Prime Day analysis. “In other words, fighting the margin battle is a no-win situation for most mid- to smaller-tier retailers. Match or undercut deep discount deals and see your margins erode – or do nothing and lose the sale, and potentially the customer.”
For Amazon, Moody’s writes, there is more to Prime Day than juicing sales in the dog days of summer. Like almost everything the company does, the shopping holiday gives customers another reason to sign up for Amazon Prime.
“While Amazon seems willing enough to sacrifice upfront margin for the sake of building its membership coffers over the longer term, we see this strategy as a credit negative for many brick & mortar retailers,” according to Moody’s.
Amazon reported its Prime member count for the first time in April: 100 million accounts worldwide. And a report from Consumer Intelligence Research Partners last week found that Amazon’s all-out blitz to beef up its Prime subscriber base pays off.
The survey of 500 people who made an Amazon purchase over a three-month period found that Prime members spend more than twice as much annually on Amazon as non-Prime members: $1,400 per year versus $600. And long-time Prime members tend to spend more, according to the survey: $1,500 per year for memberships longer than three years versus $900 for new members.
“Uniquely, through Prime, Amazon created a dedicated installed base of loyal retail customers,” Mike Levin, co-founder of CIRP said in a statement. “Stronger than a subscription business model, Amazon uses the power of member affiliation and a desire to amortize their fixed cost of membership across more member benefits, mostly by buying more stuff from Amazon.”
Prime Day 2017 grew by more than 60 percent over the prior year, the company said. Amazon didn’t give specific numbers on deals, but last year it handicapped the number of sale items in the “hundreds of thousands,” while this year it is more than a million.
This will be the first Prime Day with Whole Foods Market under the Amazon umbrella, and the grocer will be front and center. Amazon promises an additional 10 percent off hundreds of sale items at Whole Foods and deeper discounts on some popular products. Amazon Prime Rewards Visa cardmembers will get 10 percent back on Whole Foods purchases, double the normal benefit, July 14 through 17.
Last year on Prime Day, the Echo Dot was the most popular purchase, not just among Amazon devices, but across all manufacturers and categories. Amazon this morning unveiled deals on its devices, and it is offering deep discounts on various Echo products, the Fire TV Stick and Fire tablets and home security products like the Amazon Cloud Cam and Ring Video Doorbell.