Amazon’s business model relies on attracting new members, and it will offer over 1 million deals on Prime Day this year to reel them in, says e-commerce delivery specialist ParcelHero. But can its marketplace traders afford to join in?
Amazon’s Prime Day will set new records this year, says the e-commerce delivery specialist ParcelHero. It predicts Amazon’s two-day members’ only sale – on 15-16 July – will again see sales rise by 60%, bringing in around $6.704bn.
But ParcelHero says the chief objective of the event is to lure in new members – who spend twice as much as non-members with Amazon – and that Amazon will actually lose money on some sales in its desire to hook in new loyal customers.
Says ParcelHero’s Head of Consumer services, David Jinks MILT, ‘The exact numbers are not always released by Amazon, but our research shows a definite pattern of sales growth that is likely to be boosted by the switch to two days. Our research reveals that, back in 2015, the first Prime day earned the company a Prime cut of around $0.96bn; in 2016 that rose to $1.52bn; which soared to $2.41bn in 2017, and reached around $4.19bn in 2018.
‘That’s an average yearly rise of 60% in sales on the day; and if the event continues its meteoric growth, we think $6,7bn is a likely sales figure for the two-day promotion.’
But David says that’s not necessarily all good news for Amazon or the Amazon market place traders that join in the event. ‘Amazon’s goal for its Prime Day events is not short term profits but members. Last year it had more new members sign up on Prime Day than any previous day in its history. That’s what Amazon is looking for from the event.’
Explains David ‘Members are lured in by low prices and stay because of the free two-day deliveries, one day delivery options and other perks such as Prime Video. It’s well worth while for Amazon as loyal Amazonians spend more than double the amount non-members do and tend to renew their subscription as the next Prime day rolls around.’
David says: ‘Amazon can afford to take big hits on its own products. But what about its hard-pressed marketplace traders? The biggest sellers on the day are Amazon’s own Fire TV Stick, Echo Show and Echo Spot offered at literally Fire sale prices. Amazon can afford to subsidise these discounted sales for the bigger picture of more members, but for small online traders such discounts are not sustainable. In 2015 marketplace sales accounted for 52% of all Amazon Prime Day sales, by 2018 that slice rose to 62%. Amazon says its marketplace traders sold $1bn of items last year – but in order to attract sales on the big day most items will have been significantly discounted; and how much of that $1bn translates to actual profits is debatable.’
But David concludes: ‘Even at significant discounts, most marketplace members will probably still take part; and meanwhile eBay has its own ‘Crash Day’ sale also booked for 15 July to help its traders grab their slice of this now traditional midsummer madness – particularly if the Amazon site crashes like it did last year. And many more online retailers will also be jumping on this prime-time event.’
You can read more about Amazon’s revolutionary new retail and distribution plans in ParcelHero’s in-depth report: Amazon’s Prime Ambition .