The retailer's "Christmas in July" sale has spurred a price war, but will it have a lasting effect?
You probably saw it coming the minute Amazon announced Prime Day. Once the online retailer’s marketing machine declared the event would be “filled with more deals than Black Friday,” there was zero chance that Walmart and other competitors wouldn’t offer a competing sale—something they did within days.
The sales will undoubtedly cause a spike in revenues for all of the companies involved, but whether they will achieve some of the unspoken goals is a bit more questionable.
Will Amazon AMZN see a bump in Prime memberships? And what does the company have to gain long-term from this?
If nothing else, that sales spike could be a notable one.
The National Retail Federation has been tracking “Christmas in July” sales for several years. And it turns out the marketing stunt works—quite well, actually. July is one of the bigger months for retailers, according to Kathy Grannis Allen, senior director of media relations for the NRF, with sales typically reaching between $65-$70 billion in July and August (though some of that, certainly, is from back to school shopping as well).
As for the initial purpose of Prime Day, though—driving more members to Amazon Prime—that’s less of a sure thing.
“The prime drivers of Prime membership are fast shipping, access to discounted shipping, and access to Prime Instant Video,” says Colin Sebastian, senior research analyst with R.W. Baird & Co. “I think a shopping holiday like this is a bonus, but it’s not a driver of Prime subscriptions.”
What Prime Day can be, though—and what Amazon is likely hoping it will become—is another tentpole retail event. And even though the WWE-like theatrics between the retailer and Walmart are already thick, Amazon’s competitors are likely just as eager to see that happen.
“Consumers seem to like these e-shopping days,” says Sebastian. “They can point to a date on their calendar when they can get discounts on things they plan on buying. … Amazon has seen some of the success of not only Cyber Monday, which is another manufactured holiday, but in China, where Singles Day (Nov. 11) has been a very successful day to generate sales.”
Very successful might be an understatement. China-based e-commerce company Alibaba last year generated sales of more than $9 billion in 24 hours on the online shopping day. Between the shopping holiday’s launch in 2009 and 2013, sales increased 5,740%.
No one’s expecting an increase anywhere near that big with Prime Day (or Black Friday in July or whichever term eventually catches hold for the event—assuming shoppers actually turn it into an event). But Sebastian says Amazon’s instincts about a mid-year bargain blowout could prove prescient.
“It will probably a modest impact this year, but knowing Amazon, they’ve probably stumbled onto something good,” he says. “And when we’re talking about this next year or a year later, it’ll probably be a big deal.”