*Unless otherwise specified, figures quoted refer to Amazon.com
Prime Day is less than one month away. Last year, Amazon extended the deal day from 24 to 30 hours and, assuming they'll follow the same schedule, Prime Day 2018 will likely begin at 6 pm Pacific on Monday, July 9, running to the final minute of Tuesday, July 10. But since Amazon hasn't officially announced a date yet, we wouldn't be surprised if they expanded the event even more this year — Prime Day 2017 was such a huge hit that there's no doubt the demand is there.
It's never too soon to start prepping for Prime Day. Prime Day is a unique global shopping event exclusively for Amazon Prime members. The impact from this is compounding: best-selling products get more exposure and sales during Prime Day, further boosting sales. It follows that brands need to be uniquely prepared for this event, tracking and optimizing their product availability and placement, promotions, and page content (including ratings and reviews) to ensure they don't miss this opportunity.
Prime Day 2017 Recap
- Growth: Last year's Prime Day sales reached an estimated $1 billion in the US, a record-breaking number, and Amazon signed up a record number of new Prime members. Sales of items from first party brands grew by 15% to more than $600 million, driven by 34,000 unique promotions, 16,000 more than in 2016.
- Promotions: Globally, the number of promotions offered was 115% more than in the previous year. In the U.S. nearly 50 cents on every dollar was spent on a discounted item, amounting to more than 4.7 million items sold at an average of 24% off.
- Biggest Sellers: The #1 best seller of Prime Day 2017 in all markets was the Amazon Echo smart speaker. In North America, the top first-party item was the Instant Pot multifunction pressure cooker, helping to drive Kitchen to be the biggest product group of the year globally.
- Global Reach: Following last year's event, Amazon announced that Prime Day 2017 was the "Biggest Global Shopping Event in Amazon History". Most of the growth took place outside of the U.S. — including in India, where Prime Day was launched for the first time — and the countries with the largest increase in promotions also experienced the largest sales growth, such as the UK with a 220% increase in promo count and a 60% increase in total sales.
Prepping For Prime Day
- Track Inventory
On Prime Day, the goal is not to capture sales, it's to increase brand visibility and generate long-term lift. Sure, there is a lot of money to be made during this event, but it's still just one day out of 365. The best approach is to use Prime Day as a springboard to drive up average weekly sales permanently.
Prime Day is so popular among consumers that even brands that don't offer any deals or promotions often see a significant spike in sales, benefitting from the huge influx of Amazon traffic. The first and most important thing for brands to do is to make sure they don't experience stockouts. It can be challenging to keep items in stock when sales suddenly skyrocket, but selling out means losing the buy box, reducing brand visibility at a crucial time and potentially preventing brands from sustaining long-term lift.
During the inaugural Prime Day (in 2015), which was a bigger hit than anyone expected, Amazon stocked out of a huge number of popular products, resulting in a lot of unhappy customers. Stock issues have been significantly reduced — at 9am Pacific last year only one spotlight item was out of stock — which suggests that Amazon has improved their ordering system to better prepare for Prime Day, but the ordering algorithms don’t always have complete information. Brands should analyze projected sales against the Amazon-provided forecast in Vendor Central. If the forecast isn’t high enough, brands can try to influence Amazon to increase orders ahead of the event. See the below example of how stocking out after a promotion can cause weekly sales to plummet.
2. Plan Promotions
Last year, the total number of promotions on Prime Day more than doubled globally. This year, competition will be stiffer than ever, so choosing promotions wisely can mean the difference between a bestseller and a dud.
Lightning Deals: The go-to promotion for Prime Day has always been the Lightning Deal, and for good reason. In 2017, Lightning Deals were by far the most offered promotion type, with almost 450,000 unique promotions (including Prime Early Access Lightning Deals). By comparison, only a little more than 20,000 "Prime Day Deals" were offered last year. Brands love Lightning Deals for two reasons: first, they are limited to one per customer, removing the threat of stock being bought up by a third-party reseller; and second, they can limit the total number of discounted items that can be claimed, reducing the risk of stocking out or of blowing the profit margin by selling too many items at too steep a discount.
The Discount Sweet Spot: It's important to note that not all discounts are created equal. Discount levels and sales lift aren't directly correlated. Too low and people will look for a better deal from another brand, but too high and it harms the perceived value: items more than 70% off are often passed over in favor of less discounted but more desirable items. The most common discount level in 2017 was 20% to 25%, which had the effect of encouraging shoppers to seek out a better deal. The most successful brands went above the average, getting good results throughout the 25% to 45% range and with the profitability "sweet spot" falling at 30% to 35% off.
Alexa Deals: Last year, Amazon introduced new Alexa Deals, offering shoppers unique or deeper discounts for ordering an item through Amazon's voice-activated personal assistant, Alexa. Though only 169 items featured Alexa Deals in 2017, these were among the most effective promotions of 2017 and included the Instant Pot, the #1 item of the year. Alexa Deals can be a major sales driver for brands, benefitting from being made available one week in advance of Prime Day and being directly advertised by Amazon.
Marketing Promotions: Direct marketing on Amazon, such as sponsored searches and banner ads, should not be overlooked, least of all on Prime Day. It's common practice during key sales events for manufacturers to bid on a competitor's branded search term. For example, at the time of writing, competitive dog food brands are bidding on the search term "Taste of the Wild," one of the category best-sellers. On deal days like Prime Day, manufacturers should actually bid on their own branded terms in order to block competitors from controlling them.
Banner ads are a great way to increase brand visibility. A large promotional banner appearing at the top of a search results page can take up most of the “above the fold” screen space, as in the screenshot below showing Google’s sponsored banner for the term “laptops”.
These promotions drive traffic and sales by allowing brands to appear on key search terms, and data from One Click Retail and Clavis Insight shows that increased sales driven by promotions improves organic search rank: the rank will fall after the promotional period but will stabilize at a higher position than before the promotion.
3. Know Competition
Amazon first-party sellers (1Ps) are facing increased competition from both sides: third-party sellers (3Ps) and Amazon's own items and private brands. During Prime Day 2017, Amazon heavily promoted its own items — on the Prime Day home page, 10 of the 11 main categories featured an Amazon product as one of the top four items. This strategy appears to have worked, as Amazon sold three times as many Echo devices during Prime Day 2017 as they did in the previous year's event.
Third-party sellers also are rapidly increasing their impact. Last year, 54% of all promotions came from 3Ps, surpassing 1P promos for the first time.
Amazon's private brands strategy is more mature than ever and 3P sellers are slowly capturing market share from 1Ps. While total sales grew by 40% YoY during last year's event, 1P sales grew by only 15%. In 2018, brand manufacturers must work harder and smarter to stand out from the competition on Amazon. The brands that stand to benefit the most from Prime Day are those that remain highly competitive all year-round, keeping shoppers engaged, building up their ratings and reviews and maintaining a consistently strong placement.
These days, major online shopping events are everywhere, growing in scale and duration with every season. But Prime Day is different from Black Friday and Singles' Day because Amazon is using the event to grow their base of Prime members, encouraging shoppers to commit to Amazon as their go-to online retailer. Prime is a loyalty program — loyalty to Amazon and, through them, loyalty to brands — and Prime Day attracts a massive influx of new members every year, meaning a broader audience for brands, more traffic, and more repeat customers.
A successful Prime Day will turn into long-term growth for Amazon and for Amazon's suppliers. The success of this event is only going to grow Amazon's market share, bringing more traffic to the platform and more customers to the brands that sell through it. For brands, getting ready for Prime Day means investing in Amazon's enormous audience and generating the lift that will, as we've seen year after year, sustain itself long after the event is over.
Nathan Rigby is the SVP of Global Sales and Marketing at One Click Retail. In his role, Rigby is dedicated to solving e-Commerce problems through accurate, actionable and comprehensive data solutions.
Danny Silverman, CMO at Clavis Insight, is an established industry thought leader with more than 14 years of experience helping brands grow their online presence and sales. Silverman spent eight of those years at Johnson & Johnson where he led their e-Commerce strategy.