The what. Amazon confirmed last week that its annual Prime Day sales bonanza will occur earlier than normal this year. Prior to last year, Prime Day always landed in July and acted as a jump-start to Q3 and a segway into the back-to-school season. During its Q1 earnings call, CFO Brian Olsavsky said Amazon intended to hold Prime Day earlier in the year in 2020, but those plans were thwarted by the COVID pandemic. Instead, the event was held in October and kick-started the “75-day peak season” last year.
Amazon has yet to confirm a specific date, but the company said Prime Day will take place in the second quarter, implying a June event.
The why. There are a number of factors Amazon executives have pointed to in their reasoning for moving the event up, including the Tokyo Olympics taking place in July, as well as it being a “vacation month” for families.
“It might be better — for customers, sellers and vendors — to experiment with a different time period,” Olsavsky said. “We experimented the other way … in 2020 by moving it into October. But we believe that it might be better timing later in Q2. So that’s what we’re testing this year.”
Moving the event up a month may also help Amazon recreate an early start to a major shopping season. Last year, Prime Day induced a prolonged holiday season and this year it may do the same for back-to-school season. Back-to-school shopping is the second-busiest retail occasion in the U.S. behind Christmas.
I suspect the primary reason for the move is the difficult comps Amazon, and just about every other retailer, is coming up on in Q2/Q3. In 2020, consumer demand came roaring back in goods segments much faster and stronger than anticipated. “They’ve got a big number to beat,” said Neil Saunders, managing director of GlobalData Retail. “All retailers are going to suffer from this. It’s not manipulation, but it’s definitely putting the trade where it needs to go to make the numbers look very positive.”
In Q2 of last year, when Americans had just received the first stimulus payment and remained in tight social distancing measures, Amazon grew revenue 40%.
The importance. When Amazon does deal days, others follow suit. In years past, Prime Day has prompted retailers like Walmart, Target and Kohl’s to offer competing promotions. We should expect the same this year.
Also, because of Amazon’s hyperfocus on logistics, and its extraordinary capital outlays, Amazon is insulated from rising transportation costs more so than most of its competitors. At the end of 2020, Amazon Logistics was handling 50% of all shipments in the supply chain globally. According to ShipMatrix data, Amazon was delivering two-thirds of its U.S. packages last July.
Amazon can induce an environment of elevated consumer demand through other retailers attempting to compete with Prime Day. But Amazon can avoid the potential incremental parcel surcharges and other additional costs of transporting goods by leveraging its (huge and rapidly growing) proprietary logistics infrastructure — meaning Amazon can boost its sales while possibly hurting the margins of competitors that attempt to offer similar deals.
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