Amazon com (NASDAQ:AMZN)
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6 Months : From May 2019 to Nov 2019
By Sebastian Herrera and Sarah Nassauer
Amazon.com Inc. and other big retailers kicked off an annual July sales event that has come to rival Black Friday in terms of discounts and the surge in online shopping.
But for the e-commerce giant, the Prime Day event isn't just about selling discounted Instant Pots or Levi's jeans. It is another way to tighten its grip on shoppers by getting them to enroll in its Prime membership program, which adds an important revenue stream and loyal customers.
Walmart Inc., Best Buy Co., Target Corp. and others are offering their own online discounts this week and typically match Amazon's prices. The traditional retailers are using the event to steer shoppers to their stores, their house brands or their own online offerings in what is typically a slow month. But none of them sells a similar membership program that can help offset ecommerce's razor-thin profit margins.
Last year, Amazon said more than 100 million people around the globe were paying for Prime. The company has expanded the program by adding discounts at its Whole Foods grocery chain, a video-streaming service and also offering one-day or faster shipping in many markets. It raised the annual price of Prime membership to $119 from $99 last year. It also offers a plan for $12.99 a month.
Amazon added more new Prime memberships on the first day of last year's Prime Day event than any other day in the company's history, according to Jefferies analyst Brent Thill. He says Prime members are key to driving the company's growth as they spend two to three times as much as nonmembers.
The July sales event, now in its fifth year, has expanded beyond the U.S., with Amazon offering deals in more than a dozen countries. Mr. Thill estimates that Amazon's Prime penetration is roughly 30% of U.S. households and less than 5% of international markets.
Walmart tried to launch a Prime rival several years ago and abandoned the effort, instead offering free two-day shipping on many products if shoppers spend at least $35. Walmart now offers one-day shipping in some markets.
Target offers same-day delivery for customers that sign up for a $99 annual membership to its Shipt grocery-delivery service. It also offers discounts and free shipping on many orders for holders of its REDcard loyalty program, which is free.
The Prime Day event is another opportunity for Amazon to push sales of its own devices with deep discounts of its Echo speakers, Fire TV sticks and Kindle e-readers.
Online coupon tracker RetailMeNot projects more than 250 retailers are promoting sales during this year's Prime Day, which spans two days ending late Tuesday. Adobe Digital Insights, which collects sales data from thousands of U.S. retailers, estimates that sales will jump 79% at non-Amazon retailers around Prime Day, with more than $2 billion spent online by consumers.
"The Prime shopping period has become the peak shopping period for the third quarter," RetailMeNot marketing director Michelle Skupin said. "There's long been this concept of Christmas in July, but Amazon really changed the game by concentrating those deals over a shorter time period."
Retailers weren't always so savvy around Prime Day, Ms. Skupin said. When Amazon started the shopping spree in 2015, only seven other retailers were promoting sales in response. The next year roughly 20 more retailers joined in before the number spiked to 119 in 2017 and then 194 last year.
In some cases, retailers are taking direct aim at Amazon. EBay promoted a "Crash Sale" for Monday, alluding to technical glitches Amazon's website had during last year's Prime Day. On Monday, some customers were reporting technical issues with the site, such as problems adding items to their carts. Amazon said the issues only affected a very small portion of customers and were resolved within minutes.
In a video ad released before Prime Day, eBay mocked the retailer's $119 yearly fee. Walmart's website Monday promoted deals "exclusive to everyone."
As Amazon has faced increased competition during Prime Day, it has spent big to promote the event and has expanded its time frame. Amazon this year booked music artist Taylor Swift for a Prime Day concert and gained exclusive rights to sell a new beauty product by Lady Gaga beginning on Prime Day.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com and Sarah Nassauer at firstname.lastname@example.org
(END) Dow Jones Newswires
July 15, 2019 14:30 ET (18:30 GMT)
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