Why Prime Day is important to Amazon

3 months 1 day 7 hours ago Sunday, July 15 2018 Jul 15, 2018 Sunday, July 15, 2018 5:19:00 PM CDT July 15, 2018 in News
Source: CNN
By: Nathaniel Meyersohn, CNN

    (CNN Money) -- Amazon has successfully invented a new shopping holiday, and it's set to capitalize on the rewards.

The fourth Prime Day (and a half) will begin noon PT (3 p.m. ET) Monday, extending for 36 hours. The savings event this year is running longer than prior years, available for shoppers in more countries, and Amazon is promising a million deals — the most yet — for Prime members.

It's also the first Prime Day with Whole Foods, Amazon's most expensive acquisition, integrated under the Jeff Bezos umbrella.

E-Commerce Guide by CNN Underscored: What's the deal with Amazon Prime Day

Prime Day means far more to Amazon than a one-day annual marketing play. Sure, Amazon gets to flex its muscles over the retail industry and juice sales numbers. But, more importantly, Amazon uses the savings event to spotlight its own products and hook new members on a subscription program that more than 100 million people around the world count as an indispensable part of their shopping lives.

Priming the pump

Amazon doesn't disclose revenue from previous Prime Days, but it's predicted to reach $3.4 billion this year, according to retail think tank Coresight Research.

Sales for the event are projected to shatter last year's total by 40% and become Amazon's new single day record, breaking its 2017 Cyber Monday haul.

But Monday will be trivial to Amazon's financial picture, noted Michael Pachter, an analyst at Wedbush Securities. Sales are projected to be only six times a normal day, or around 2% of Amazon's annual retail revenue, he said. The company brought in a total of $177.9 billion in sales last year across its retail and web services division.

Prime Day serves a longer-term importance to Amazon by driving new members to its $119 annual free-shipping program and tightening existing customer relationships to the company's ecosystem. More than half of Americans said they lived in a household with Prime, according to a Cowen survey in December.

Prime is the "most critical driver" for Amazon's e-commerce business in the long run, argued Cowen analyst John Blackledge.

Prime has added around 10 million new subscribers a year for the past three years, and Blackledge believes Amazon has even more room to convert non-members who shop on Amazon into loyalists. The Prime model adds monthly and annual fees into Amazon's coffers, and Prime members spend more on the site than shoppers without the subscription.

Members spend $1,400 a year, compared to about $600 a year for non-members, according to market research firm Consumer Intelligence Research Partners.

"From Amazon's perspective, Amazon Prime members improve with age," said the firm's co-founder Mike Levin. "As more Prime members reach their third, fourth or even longer anniversary, average spending should increase."

'Step Aside Black Friday'

Amazon tested out its inaugural Prime Day in July of 2015 to celebrate the company's 20th anniversary. It designed the day to replicate Black Friday for Amazon die-hards, but boasted more deals than the November shopping tradition.

"Step Aside Black Friday - Meet Prime Day," Amazon said in a news statement unveiling the event.

Amazon recorded $900 million in sales its first year, according to Coresight. Amazon CFO Brian Olsavsky called it "Christmas in July."

The company decided to bring it back for a second year with more deals. Sales hit $1.5 billion, according to Coresight's estimate.

In 2017, Prime Day "really got a lot more traction...in particular internationally," Olsavsky told analysts last October. The company had a record number of free Prime trial sign-ups, and its Echo Dot smart speaker was the best-selling product.

"Amazon is betting long term on voice-enabled commerce," Magid retail analyst Matt Sargent said last year.

Prime Day has forced Amazon's rivals to adjust to the frenzy.

"The day creates a short-term urgency," said Barbara Khan, a marketing professor at Wharton who studies retail. "People get engaged just to make a purchase, to take advantage of the deal."

It has become the firing gun for the start of back-to-school shopping, the second busiest shopping time of the year.

"Prime Day has changed the terrain of the summer for retailers," said Adobe Digital Insights director Taylor Schreiner. "Retailers need an effective strategy to address it. The only guaranteed losing play is to ignore it."

Rivals aren't sitting on their heels: Walmart, for example, debuted new apps and online tools for back-to-school shopping, including a 3D virtual experience called "Buy the Room," and deals on school supplies. Target also announced a one-day sale to rival Amazon on Tuesday for "everyone—no membership required."

Whole Foods' debut

Amazon again will again offer deals on Alexa-enabled devices such as Echo, Echo Show, Fire TV and Fire tablets this year.

It's highlighting discounts on its growing lineup of private label brands such as Stone & Beam, Rivet, Presto!, Wickedly Prime, and Goodthreads.

Despite the heavy promotions, selling its own products on Prime Day should help the company's profit margins because it can cut out first and third-party sellers.

Whole Foods will be the biggest change to the 2018 show.

Amazon is offering Prime members a $10 credit when they spend $10 or more at Whole Foods between July 11 through 17. Whole Foods is also offering deals on grocery items like boneless chicken breasts, and doubling the cash back bonus to 10% from 5% for Amazon Prime Rewards Visa card holders.

Related: Whole Foods announces its Prime Day deal

"This year seems a bit more ambitious, as they have fully integrated Whole Foods into the mix," said Wedbush's Pachter.

Whole Foods has recorded nine straight months of 2% to 3% same-store sales growth since the acquisition last year, according to RBC Capital Markets analyst Mark Mahaney. Amazon is driving traffic to Whole Foods by lowering prices and increasing Prime discount benefits.

Monday will be the biggest opportunity yet for Amazon to lock more Whole Foods shoppers into Prime members.

The-CNN-Wire
™ & © 2018 Cable News Network, Inc., a Time Warner Company. All rights reserved.

More News

Grid
List
JEFFERSON CITY - The state Capitol building is set to receive interior upgrades after the Missouri Capitol Commission met with... More >>
23 minutes ago Tuesday, October 16 2018 Oct 16, 2018 Tuesday, October 16, 2018 7:38:00 AM CDT October 16, 2018 in News
ST. LOUIS (AP) — Authorities say a suspect in two deadly St. Louis shootings has been linked to a third.... More >>
46 minutes ago Tuesday, October 16 2018 Oct 16, 2018 Tuesday, October 16, 2018 7:14:33 AM CDT October 16, 2018 in News
PANAMA CITY, Fla. (AP) — Joanne Garone Behnke has replayed every possible scenario in her mind a hundred times. ... More >>
11 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 8:44:00 PM CDT October 15, 2018 in News
COLUMBIA- Columbia Public School's out-of-school suspension rates for black students is double the rate of out-of-school suspensions given to white... More >>
11 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 8:06:00 PM CDT October 15, 2018 in News
(AP) - Two companies facing multiple lawsuits over a summer tourist boat accident in Missouri that killed 17 people have... More >>
12 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 7:24:00 PM CDT October 15, 2018 in News
(CNN) - A federal judge has dismissed adult film star Stormy Daniels' defamation lawsuit against President Donald Trump. Daniels... More >>
13 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 6:57:00 PM CDT October 15, 2018 in News
MEXICO - A Mexico teenager faces 27 counts of child sexual abuse. Probable cause documents allege 17-year-old Chandler Douse... More >>
13 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 6:39:00 PM CDT October 15, 2018 in News
COLUMBIA - The Columbia City Council is looking into a way to decrease oil and grease storage on city streets... More >>
13 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 6:35:00 PM CDT October 15, 2018 in News
FULTON - Two Columbia residents were taken into custody at a traffic stop Monday charged with the possession and distribution... More >>
14 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 5:27:00 PM CDT October 15, 2018 in News
COLUMBIA - The Columbia City Council is talking about building two roundabouts on Nifong Boulevard in an attempt to reduce... More >>
16 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 3:35:00 PM CDT October 15, 2018 in News
(CNN) - Former Senate Intelligence Committee staff member James Wolfe pleaded guilty Monday to one count of lying to the... More >>
16 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 3:31:00 PM CDT October 15, 2018 in News
COLUMBIA – A walkway outside of the Royal Inn off I-70 showed signs of structural damage Monday afternoon and guests... More >>
17 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 2:58:00 PM CDT October 15, 2018 in News
(CNN) - It's been five days since Hurricane Michael decimated Mexico Beach, and dozens of residents are still nowhere to... More >>
17 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 2:30:00 PM CDT October 15, 2018 in News
JEFFERSON CITY, Mo. (AP) — The Latest on fundraising in the Missouri U.S. Senate race (all times local): 3... More >>
18 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 1:52:00 PM CDT October 15, 2018 in News
COLUMBIA - Gov. Mike Parson kicked off what he calls "Infrastructure Week" Monday morning at the Missouri Department of Conservation... More >>
18 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 1:26:00 PM CDT October 15, 2018 in News
JEFFERSON CITY- A federal judge says Missouri has violated the rights of people serving life in prison without parole for... More >>
20 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 11:35:48 AM CDT October 15, 2018 in News
MONITEAU COUNTY- A man was arrested and accused of trying to run over his girlfriend and son with a truck... More >>
20 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 11:28:00 AM CDT October 15, 2018 in News
COLUMBIA- The Boone County Sheriff's Department is investigating a pair of armed robberies at convenience stores over the weekend. ... More >>
22 hours ago Monday, October 15 2018 Oct 15, 2018 Monday, October 15, 2018 9:54:00 AM CDT October 15, 2018 in News
Columbia, MO
Broken Clouds 31°
8am 34°
9am 40°
10am 45°
11am 49°