Amazon.com celebrated its 20th anniversary in 2015 by creating “Prime Day,” a shopping “holiday” that offered Prime members an ongoing series of deals over the 24 hours of July 15. Although much of the news that day focused on disappointed Prime Day shoppers, Amazon quickly declared victory — and rightly so, from its perspective. Amazon therefore decided to make Prime Day an annual event, and it will take place on July 12 this year.
Last year, several competitors held sales to counter Amazon’s promotion, and that response will only be amplified in 2016. Best Buy, for instance, is touting a “Cyber Monday in July” sale, while FreeShipping.com is giving subscribers 20 percent cash back on their purchases at over 1,000 retailers for three straight days. Retailers have been trying to create a blockbuster summer sales event for decades, after all, and the fact that Prime Day is an Amazon invention is no reason to ignore the opportunity. Indeed, a look at the bigger landscape adds urgency to the effort.
Since its inception, Amazon has focused, first and foremost, on building and sustaining a large, loyal customer base. Since a subscription shopping program is the ideal vehicle for that purpose, it created Amazon Prime in 2005 and began offering members pre-paid, two-day shipping on millions of items. As the e-commerce universe expanded, so did the Prime benefit list, which has helped Amazon attract and retain an ever-larger number of online shoppers.
Amazon’s success metrics these days involve its Prime membership, and with an estimated 54 million U.S. members, it’s doing exceptionally well in that area. Last year’s Prime Day helped third quarter enrollments grow by 7 percent, more than twice the growth rate in the third quarter of 2014, and a survey found that 25 percent of respondents said Prime Day was the impetus behind their decision to join. Once consumers enroll in Prime, they’re almost certain to stay; per another study:
- 71 percent of trial members join for a full year;
- 91 percent of first-year members sign up for a second year; and
- 96 percent of them renew for a third year.
What’s more, the longer a Prime member stays, the more that person spends with Amazon each year. A recent analysis estimated that, in 2015, on average:
- non-Prime shoppers spent under $1,000;
- Prime members who enrolled in January 2014 spent $2,147; and
- Prime members who started in January 2012 spent $3,091.
Although Prime Day expanded the Prime audience, it wasn’t flawlessly executed. Unpopular deals, long site-loading delays, low inventories and other complaints caused #PrimeDayFail and other notes of discontent to trend on Twitter that day. These shortcomings give Amazon’s competitors reasons for optimism.
Amazon tends to learn from its mistake, however. It’s promising new deals every five minutes on Prime Day 2016 (twice as fast as last year’s rate), and increasing its inventory for hot-ticket items. For example, it’s doubling the number of in-stock televisions. With over 100,000 total deals, Amazon is clearly trying to satisfy the needs, interests and desires of a wide range of shoppers — as long as they join or belong to Prime.
Rival retailers have had a year to plan their own sales and prepare their customers for a shopping extravaganza. That starts with analyzing their behavior to figure out what they really want, and then making sure those shoppers are fully aware of and ready to respond to the deals. As Amazon continues to hone that process to advance its primary goal, Prime Day 2016 will give its competitors a chance to see how they compare.
Tom Caporaso is the CEO of Clarus Commerce, a provider of e-commerce and subscription commerce solutions. Among its various properties, Clarus Commerce powers FreeShipping.com, and customizes and manages programs, such as Return Saver, which it co-developed with FedEx, and 2-Day Shipping by MasterCard, for clients across a wide range of industries.
Related story: Amazon Sets Date for Prime Day
An expert in customer loyalty and retention, Clarus partners with brands to develop, implement and manage premium loyalty programs that are fully customizable based on their unique consumer’s needs. Tom’s expertise spans the e-commerce, grocery, retail and publishing industries and focuses on customer loyalty and consumer behavior. He has been featured in Nasdaq, CNBC, The Wall Street Journal, Fortune, The Next Web, The Washington Post and much more.