Prime Day Showing Its Age
Stephen Baker, Vice President, Industry Advisor ;
Consumer Electronics Technology
With Amazon’s now annual summer buying event upon us, we’re looking back at the past two years to evaluate the impact of Prime Day to tech vendors, to Amazon’s tech business, to Amazon’s Kindle/Echo businesses and to online consumer tech as a whole.
After two years it is quite obvious that, like the Black Friday event Prime Day seeks to emulate, Prime Day is already morphing and changing. Much like we have seen Black Friday evolve into a whole week of deals (and in some cases a whole month), Prime Day has already begun its calendar expansion this year. We would suggest that this expansion is not necessarily a good thing, as it dilutes the idea of a day (just like it isn’t great for Black Friday), and has more to do with maintaining consumer interest and a need to stretch the period out in order to maximize the return.
Of course, unlike Black Friday, Prime Day remains very much an Amazon-focused event with the rest of the online (and offline) world still trying to develop a competing product or strategy. In fact, according to NPD Checkout TrackingSM, Amazon accounted for 88 percent of online tech sales on Prime Day 2016, up six points from the prior year, and far above the 55 percent of volume they generated over the last 12 months (ending April 2017). Amazon’s secret weapon (at least for tech) is that it uses Prime Day not just as a way to promote aggressively priced consumer technology products to grow its overall share, but to also co-promote its ever-expanding portfolio of brands, such as the Kindle and Echo families of products. While this strategy is great for Amazon, the numbers show that, Prime Day’s usefulness as a promotion vehicle for consumer tech as a whole is considerably more limited (like we see on Black Friday).
Amazon’s tech business clearly gets a bump from the Prime Day promotion. Just like Black Friday drives crowds into stores (or at least it used to), Prime Day delivers traffic and volume to Amazon. For Amazon, overall, its buyer share (percent of shoppers who shopped at a particular retailer) of e-commerce jumps to over 50 percent on Prime Day from the low 30 percent range both before and after the sale, as reported by NPD Checkout Tracking. Does this help Amazon’s tech business? As we said earlier, Amazon’s share of online sales jumps 30 points on Prime Day. In 2016, that equated to 70 percent in revenue. But, there is that catch mentioned previously. Of the increase, fully 60 percent of the incremental dollars spent on tech on Prime Day are spent on Amazon products, driving that 70 percent growth rate down to 29 percent, which is good but not all that special considering the hype of the day and the long-term momentum of Amazon’s retail tech business. Even the breadth of the business is impacted. On Prime Day, three of the four biggest categories were wireless speakers, tablets & e-readers, and streaming video players, all of which are driven by Amazon’s sale prices on Amazon-branded products, not on third-party products, or their vendor’s products. A big win for Amazon’s branded products and Amazon Prime, but not such a big win for Amazon’s vendor partners.
Vendor partners (both direct and marketplace) and Amazon’s retail tech business certainly benefit from Prime Day’s incremental volume; but once the excitement of Prime Day is over, much like we see on Black Friday and oftentimes for big sales events at other times of the year, that increase does not seem to translate into long-term gains. Using NPD Checkout Tracking to compare the sales from 10 weeks prior to Prime Day, Prime Day sales, and sales from the 10 weeks after Prime Day, we find that the trajectory of Amazon’s retail tech business is basically unchanged. Sales in the 10-week period before Prime Day increased 29 percent and in the post-Prime Day period they grew 26 percent, a negligible difference.
The end result of the last two years of Prime Day is that, like any retailer’s sale goals, success is measured in the incremental benefit to the retailer and oftentimes very little of that benefit accrues to its vendor partners. That is clearly the case here, with Amazon seeing benefits with its Prime membership and in growing the installed base of Amazon hardware, but with little incremental opportunity for its vendor partners (or for Amazon’s own retail tech business) over and above Amazon’s ongoing impressive growth rates. When the deals and the final results for Prime Day 2017 are tallied, it’s likely that its similarity to Black Friday will have increased. As Prime Day increasingly mirrors the form, function and focus of Black Friday its utility to the vendor community will diminish as Amazon’s goals continue to outweigh the needs of its partners.