Prime Day is almost here. Actually, it’s two days. But who’s counting? Well, Amazon sure is. Scheduled for June 21 and 22, the annual sales event is closely followed by many Prime members eager for deals.
Overcoming a lackluster 2015 debut and a 2018 online outage, Prime Day has become one of the most important annual events for the company, effectively creating a second peak season, six months after the holiday shopping rush.
Providing a sense for the scale, Amazon says customers saved $1.4 billion during Prime Day last year, when the event was delayed to October due to the COVID-19 pandemic. It was previously held in July. This year, the lingering impact of the pandemic is both complicating Prime Day and raising the stakes.
On this episode of Day 2, GeekWire’s podcast about everything Amazon, we go behind the scenes of Prime Day with two e-commerce veterans:
- Our podcast collaborator, Jason Boyce, former Top 200 third-party seller, founder of Avenue7Media and co-author of The Amazon Jungle.
- Andrea Leigh, vice president of strategy and insights at Ideoclick, a Seattle-based e-commerce technology and services firm that works with vendors to Amazon’s first-party retail sales, and third-party sellers. Leigh was an Amazon general manager and retail category leader for nearly 10 years.
Listen above, subscribe in any podcast app, and keep reading for highlights.
Prime Day is important for Amazon’s business for several reasons, Leigh said.
1) Brands boost their advertising on Amazon to promote their products before, during and after the sales event. The increased competition for keywords causes higher spending and CPC (cost per click) for advertising.
“We’re typically adjusting manufacturers’ budgets up by usually around 50% for that time period, and that’s a lot of ad revenue for Amazon,” Leigh said.
2) Prime Day is especially important this year because e-commerce retailers are struggling match or exceed what they sold at the height of the pandemic.
“The year-over-year growth numbers for vendors and for Amazon are not good right now, because this time last year was such a big ecommerce boom. They’re able to use the sale event to get some of the vendor and seller community to help fund that shift in consumer behavior, and pad some of those growth numbers.”
3) Amazon appears to be sitting on a large amount of inventory in its warehouses, clogging up the system for vendors and third-party retailers. Clearing out inventory may be one reason Amazon moved the event up, into the second quarter, Leigh said.
“We track all of our clients’ sales data and purchase order volume data, and I think Amazon’s overstocked, big time,” Leigh said. “The purchase order data is usually starting to go up in advance of Prime Day, and it’s been going down for the last few weeks. I think their systems over-ordered.
“You’d have to have a crystal ball to know how many people were going to shop online in March of this year. So I think they over-ordered, and I think they’re sitting on a lot of inventory right now.”
Another wrinkle this year: ongoing supply chain challenges and manufacturing delays in the global economy, also resulting from the pandemic.
“For consumers, what that means is that the deals are going to be a little more focused on what’s available versus the ‘headline’ deal,” Leigh said. “But that doesn’t mean they’re not good deals. And it doesn’t mean they’re bad products. It just might not be the top seller, or may be more focused on product that’s in stock.”
Like it or not, Boyce said, it’s critical for third-party sellers to take part in Prime Day.
“It’s become a necessary evil, like so many things on Amazon for third party sellers,” he said. “Because if you don’t discount, you’re going to have a competitor come in there and swoop and maybe bump you in your organic search results rank or your positioning. … So even if you don’t want to participate in Prime Day, you kind of have to now.”
Amazon has brought back a pre-Prime Day promotion for small businesses, offering a $10 discount to customers who spend at least $10 with small businesses on Amazon between June 7 and June 20. More than 2.5 million Prime members took part in the promotion this year in the first 24 hours, the company says.
Prime Day sales by third-party sellers were more than $3.5 billion last year, up 60% year-over-year, Amazon said.
The event this year comes at a time of rising antitrust scrutiny of Amazon’s programs for third-party sellers. Amazon has brought in Kristen Bell and other celebrity endorsers to promote Prime Day’s benefits for small businesses this year.
In many ways, the issues surrounding Prime Day are a window into the larger state of Amazon’s first- and third-party retail business. Also referenced in the discussion:
- Leigh’s recent Retail Touchpoints article, “A Consumer Brands’ Guide to Understanding and Navigating Amazon’s Private Label Business.”
- Our recent podcast about Amazon customer reviews.
- The acquisition of Buy Box Experts, an early Amazon consultancy co-founded by former Amazon business leader James Thomson, who is based in the Seattle region.
- Amazon’s Prime Day Show, premiering on June 17, featuring Billie Eilish, H.E.R. and Kid Cudi.
- The impact of Prime Day on Amazon’s financial results and Wall Street’s expectations.
Listen to the episode above, or subscribe GeekWire’s Day 2 podcast in Apple Podcasts, Google Podcasts, Spotify or any podcast app.
