Move over Black Friday and Cyber Monday. Amazon’s Prime Day has solidified its place on the retail calendar along with those more traditional holiday stalwarts. Now positioned as “an epic day (and a half),” the fourth iteration of the Prime-exclusive, global shopping event begins on July 16 at noon PT/3 p.m. ET and will continue for 36 hours, its longest duration yet. Originally designed as a recruitment tactic for Amazon’s loyalty program, Prime Day has evolved into a way for the retailer to further embed itself into its members’ routines. Deepening its relationship with those 100 million Prime members worldwide is of utmost importance to the retailer as the program scales. And in the U.S., reinforcing Prime’s value will be especially important since Amazon increased the annual Prime membership fee to USD119 in May.
Building on last year’s Prime Day momentum — in which 9% of shoppers made a purchase — Amazon will again use the occasion to boost conversion during an otherwise quiet quarter for retail (Figure 1). Consistent with previous Prime Days, the retailer will generate anticipation with media and countdown deals, while using the occasion itself to encourage trial and adoption of its latest initiatives.
Figure 1. Percent of All Shoppers Who Shopped and Purchased on Prime Day
(among all primary U.S. household shoppers)
Note: Arrows indicate significant increase vs. prior year (95% confidence level).
Source: ShopperScape®, July 2015, July 2016, and July 2017
So what can we expect from Prime Day this year, and what can suppliers learn? We anticipate the following themes will be evident throughout Prime Day 2018.
1. Emphasis on private label and exclusives: Amazon will leverage Prime Day traffic to elevate its recently expanded private label options. With more than 70 private label brands now available on Amazon’s U.S. site, watch for the retailer to prioritize its own brands in Prime Day messaging and promotions. Last week, 11 days before the event, Amazon unveiled deals on its top private label selection, with even deeper discounts promised for Prime Day itself. To lock in loyalty for Prime-exclusive consumables lines like Presto! and Mama Bear, we expect Amazon to create incentives for members to order these products using Alexa, which would make Amazon’s own brands the default for future voice purchases. Shoppers may also be able to sample Amazon’s private label foods (including Wickedly Prime and Happy Belly products) in person now that the retailer has a much more substantial physical footprint with the acquisition of Whole Foods. In general merchandise categories, Amazon will likely drive awareness of AR View, Prime Wardrobe, Echo Look and other new tools designed to reduce purchase uncertainty. Of course, Amazon’s device portfolio will also have a heavy presence as the retailer further extends its reach into more members’ homes, with price cuts that rival those of Cyber Monday.
In response, suppliers must invest in Prime-exclusive products and services to effectively position themselves against private label dominance on Prime Day. According to Amazon, various brands worldwide will offer early access, limited-time Prime Day launches for exclusive new items, content, and special-edition products. In the U.S., Prime members will be the first to shop items like the Delta Trinsic Touch2O voice-activated faucet, the first Alexa-enabled kitchen faucet; Fingerlings Light Up Unicorn Mackenzie, the first Fingerling with a special light-up horn; and Bai’s Braspberry flavor. By actively rewarding Prime members with a proposition they cannot find elsewhere, Amazon adds value beyond price to defend against comping from competitors and one-off deal seekers.
2. Focus on cultivating in-person engagement: This year, we expect Amazon to take Prime Day beyond an online-only occasion by incorporating its expanded brick-and-mortar network. For the first time ever, Whole Foods Market will participate in the Prime Day festivities, offering deep discounts on select popular products. These discounts are in addition to the new Prime benefit of 10% off hundreds of sale items at Whole Foods’ more than 470 locations. Other physical formats, such as Amazon Books and Treasure Truck, will also be positioned as recruitment tools during the event, serving as billboards for Prime membership. As it did last year, Amazon will likely create incentives for offline-to-online behavior with in-store coupons that can be redeemed on Amazon.com. Suppliers can play here by capitalizing on Amazon’s various physical touchpoints to foster brand interaction with sampling or sponsorship opportunities to reach shoppers.
To further that point, the retailer also plans to highlight Prime’s digital media portfolio through a new marketing event called “Unboxing Prime Day.” Leading up to July 16, giant smile boxes will pop up in New York City, Los Angeles, London, Tokyo, and Milan, opening to reveal a likely livestreamed celebration related to Prime benefits in music, video, gaming, and more. Here, Amazon is taking a page from Alibaba’s 88 membership program; in fact, Alibaba hosted a private concert for Super Members during its own Members Festival last year. This experiential approach helps increase excitement for Prime Day, while asserting Amazon’s broader role as an entertainment destination.
3. Rewards for its most active members: As Prime membership moves toward a more tiered model, Prime Day promotions will reflect recent efforts to reward the level of member engagement. For example, its presumably most dedicated members, Prime Rewards Visa cardholders, will receive double the rewards (10% back) when shopping at Whole Foods on Prime Day. Amazon will structure promotions to secure recurring purchases and long-term loyalty, with a notable emphasis on Subscribe & Save discounts. In doing so, Amazon encourages current and repeat use of its various online grocery channels, including Prime Now and AmazonFresh, likely with credits that can be redeemed on future orders. Since Prime Pantry is now a membership scheme, creating adoption incentives will be especially crucial to ensure that it remains part of members’ shopping routines.
Consistent with last year, we expect Prime Day to highlight lesser-known perks like Prime Reload or Amazon Pay Places as Amazon seeks to increase shoppers’ awareness of the broader Prime ecosystem. We will also be watching for Amazon to incorporate a social element this year, possibly through Amazon Influencers, Twitch, or its new Amazon Spark platform. Here, Amazon could potentially compensate Prime members for sharing their favorite Prime Day deals with followers. Leading up to Prime Day, brands should deploy their own social media partners to drive interest.
4. Appeals targeted at underpenetrated demographics: With Prime reaching scale in Amazon’s more mature market — nearly half of U.S. households are Prime members — the retailer needs to attract new shopper segments for the program to grow. As a result, Prime Day’s appeals may focus on benefits tailored to lower-income or older shoppers, such as its monthly membership discount for shoppers with an eligible EBT or Medicaid card. More broadly, the tone of this year’s Prime Day (from a recruitment perspective) may be about reducing monetary barriers to joining Prime, especially with new countries, including Australia, Singapore, the Netherlands, and Luxembourg, joining the celebration.
Amazon is preparing for another record-setting Prime Day, which was nearly on par with Cyber Monday as one of its biggest shopping events last year. The historic success of this unconventional “holiday” has inspired other retailers to launch their own versions, such as Wayfair’s “Way Day” held in April 2018. We expect competitors will again look to capitalize on the uptick in online traffic expected July 16-17 and steal trips from Amazon. The best Prime Day execution will come from those retailers that creatively leverage their omnichannel assets to provide a differentiated proposition that will resonate with their own most loyal shoppers.
Tune in here for an in-depth analysis of Prime Day 2018 once the event unfolds.
For more information, please contact:
Meaghan Werle, Senior Analyst