Actionable Insights From APT's Retail Practice

The Appeal of Amazon Prime Day and How Retailers Can Emulate its Success

August 16th, 2017 | Posted by APT in Retail

With Amazon Prime Day 2016 generating an estimated $500-600 million in incremental sales, the special, one-day price-cutting event was clearly very successful. Prime Day sales for 2017 skyrocketed even further: over 60% higher in comparison. And beyond sales alone, a record number of customers signed up for Amazon Prime on Prime Day 2017 – more than on any single day, ever – to cash in on the Prime Day deals.

Many elements of Prime Day contribute to its mass appeal, from the wide variety of merchandise available and the convenience to the urgency created by the limited availability of the one-day event. While other retailers may not be able to replicate the exact recipe for Amazon Prime Day, at the heart of this concept is a focus on driving customer engagement. With more Prime members making a purchase on Prime Day this year than last, and orders via mobile app more than doubling, how can retailers harness the power of this model and apply it to their own business?

One key component of Prime Day is its demonstrated ability to drive Prime membership. Many retailers are already capitalizing on a similar strategy through their loyalty programs, offering shoppers special perks for joining. For example, online retailer Zappos offers double points and free expedited shipping for rewards members, while apparel retailer Madewell offers “Insider” members free shipping and returns for online orders, plus early access to exclusive design collaborations.

Another obvious advantage of the Prime Day program is its focus on slashing prices across a wide assortment of items. Marked down merchandise ranges from practical, such as home appliances and apparel, to fun, such as video game consoles and children’s toys. While not every retailer may have the same variety of offerings, larger retailers can fight back against Prime Day through price comparisons. This strategy may be particularly effective for retailers who sell only apparel or only electronics, for example; rather than trying to match Amazon in every category, they can focus on refining prices on the goods in which they specialize. Price matching or undercutting on Prime Day may show that these special promotions are not as rich as people may think.

While there are a variety of approaches retailers can try out to maintain market share not only in the face of Prime Day, but e-commerce competition more broadly, it will be critical that they innovate smartly and only implement the programs that will lead to the greatest ROI. For example, a retailer interested in rolling out an online rewards program like Prime must carefully think through the different considerations.

These may include questions such as:

  1. Which perks should we offer?
  2. Will offering free shipping or special discounts drive enough new business to justify the upfront cost?
  3. Will the program truly attract new customers, or merely subsidize the purchases of existing loyal shoppers?
  4. Will this program cannibalize sales via other channels (such as in-store)?

By testing such initiatives on a smaller scale, and first offering signups only in select geographies, then comparing their performance to that of similar geographies that did not receive the signup offer, the retailer could pinpoint the true impact of the online rewards program on purchases across channels.

Particularly for smaller retailers, creating their own one-day bargain blitz may not be effective, but by tapping into the most effective aspects of Prime Day – including membership programs, special perks and strategic pricing structures – they can successfully increase their own customer engagement and drive profits.

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