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Predictions About Amazon Prime Day

Supporting the Prime Directive 7/14/2015 10:45:00 AM

Amazon plans to celebrate the 20th anniversary of its launch with Prime Day, which will offer Prime members a series of flash deals from midnight through 11:59 p.m. on July 15.

It’s promoting the event by promising “more deals than Black Friday.”  In addition to getting unlimited free shipping that day, Prime members will see a new savings opportunity on Amazon’s home page every 10 minutes.  These savings won’t be available to non-members, but they can join Prime to take immediate advantage of an offer and then try the program free for 30 days.

Prime Day is a shrewd marketing ploy, but it will also serve Amazon in ways that go beyond simply celebrating Amazon’s debut.

It will draw attention — and new members — to Amazon Prime: This article is just one in a countless slew of Prime Day reports.  The vast majority of them will no doubt highlight Prime’s benefits, and many will reach a national audience — repeatedly and free of charge to Amazon.  It’s impossible to buy that amount of marketing time and coverage.

Amazon keeps building new product lines and adding new services in its ceaseless quest to grow its audience.  Prime has proven quite successful at bringing more shoppers into the fold, and Prime Day is a quick, easy way to support that effort.  In fact, once people try the program, they’re highly likely to stay: Prime reportedly has a 70 percent retention rate among trial members.

It will take attention — and subscribers — away from Jet.com: Industry observers attributed Amazon’s recent flurry of deals on certain items to its concerns about next week’s launch of online discounter Jet.com, and given Jet’s Costco-like membership model and CEO Marc Lore’s background, the Amazon vs. Jet narrative bears watching.  Even more critical for Amazon, most reviews of the Jet.com beta site concluded that it will offer better deals than Amazon.  A Boomerang Commerce study, for example, found that Jet prices were lower than Amazon’s “94 percent of the time.”  In a Re/Code shopping-cart comparison of five random items, Amazon’s total costs were 13.45 percent higher than Jet’s.

Creating a special, one-day sales event changes that conversation (at least momentarily), promotes Prime, and gives Amazon a great opportunity to preemptively reduce Jet’s potential audience.  Prime and Jet aren’t identical by any means, but if they’ve just joined Prime, most consumers won’t be inclined to try Jet.

It will support Prime members’ high conversion rate: In the most recently measured time period, the average Prime member turned an Amazon shopping trip into a purchase 74 percent of the time, far exceeding the remarkable 63 percent conversion rate that Amazon achieved in April.  That high rate is due in large part to the paid subscription model.  Consumers who pay to join a shopping program will try to maximize the return on their investment, and they’re also more likely to use the program when they’re ready to buy because they know they’ll save on their purchases.  On Prime Day, most members will respond only to the sales that appeal to them, so their conversion rate will continue to be the envy of retailers everywhere.

All that said, it’s hard to predict how successful the event will be, for several reasons:

*July 15 falls in the middle of a peak vacation period, which could adversely affect consumers’ purchasing power;

*Halloween, the next “shopping holiday” is over three months away, but Amazon could lure parents to the site with back-to-school deals;

*flash sales have lost their shopping appeal, although offering them to subscribers could combat that trend, and;

*competitors have already developed sales to counter Prime Day.

Here’s one sure prediction, though:  Good, bad, or indifferent, we won’t really know how successful Prime Day was after the fact.  Amazon is famously tight-lipped about specific member data, so it’s unlikely to announce exactly how many people joined or paid an annual fee after the trial, much less how much money the event generated.  However, if Prime Day becomes an annual Amazon feature, we can make some educated guesses.

Tom Caporaso is CEO of Clarus Commerce, a provider of e-commerce and subscription commerce solutions.  Among its properties, Clarus powers FreeShipping.com, a pioneer in the prepaid shipping and cashback movement.  Clarus also customizes and manages programs for clients across a wide range of industries, including Return Saver, which it co-developed with FedEx, and 2-Day Shipping by MasterCard.

 

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