Prime Day Retail Challenge: Join Amazon, Fight Back…Or Both?

As many as 74% of U.S. e-Commerce transactions took place through Amazon on its self-created shopping holiday Prime Day in 2016, according to Slice Intelligence. And with JP Morgan analysts estimating that Amazon will rake in as much as $1 billion on this year’s Prime Day, July 11, retailers in every vertical are preparing to take a piece of that pie.

The time is ripe for competing retailers to take advantage of the buying frenzy without worrying that they will be drowned out by the e-Commerce giant. Recent research has revealed that  as many as 35 million shoppers have quit Amazon Prime at some point, so it’s possible for retailers to take advantage of every opportunity the day has to offer without feeling intimidated by Amazon’s massive reach. But whether retailers are working with Amazon or competing against it, they’re going to have to focus on improving their own customer experiences above all else.

“Retailers trying to drive that loyalty out of their most dedicated shoppers and show their appreciation for those people will find the most success, rather than trying to undercut Prime Day’s deals,” said Meaghan Werle, E-Commerce Analyst at Kantar Retail in an interview with Retail TouchPoints. “They have to reinforce why they have a differentiated proposition from Amazon and attract their core shopper versus trying to track their one-off deal-seekers.”


Prime Day Powers E-Commerce Engines Everywhere

Retailers should prepare for Prime Day the way they would prepare for any holiday at this point, as the shopping day has become a rising tide that lifts all retail boats. On Prime Day 2016, e-Commerce retailers saw massive increases at all phases of the conversion funnel, according to research from Criteo:

  • Total number of shoppers visiting major e-Commerce web sites increased 15%;

  • Total site usage/engagement increased 21%;

  • Total number of add-to-basket events increased 40%;

  • Average conversion rate increased 27%;

  • Total number of transactions increased 45%; and

  • Total order value increased 55%.

SMBs Anticipate Major Benefits

Smaller retailers and sellers have taken to Amazon’s marketplace to gain more exposure for their brand and products, and Prime Day only intensified those results in 2016; small businesses and entrepreneurs on Amazon saw orders nearly triple year-over-year. Expect these results to continue in 2017: Amazon anticipates that these sellers will offer 50% more Prime Day Lightning Deals than last year, while they will be responsible for more than 40% of all Prime Day Lightning Deals.

These third-party sellers have had plenty of compelling reasons to leverage Amazon as a viable sales channel, according to data from SLI Systems. As many as 65% added the marketplace to their e-Commerce strategy to increase sales, while:

  • 47% joined to acquire new customers;
  • 47% joined to gain visibility from a high traffic channel;
  • 33% joined for the Fulfillment by Amazon (FBA) service;
  • 31% joined for the ease of use for their consumers; and
  • 25% joined for the infrastructure.

Amazon has welcomed these sellers with open arms, and has undertaken a massive effort to steer them into its marketplace. Seeking to provide its sellers with the tools necessary to succeed, Amazon hosted its first-ever “Boost with FBA” summit in New York City on June 28 to educate small businesses and entrepreneurs participating in the FBA service.

“Amazon is going to elevate these sellers on Prime Day,” said Werle. “They’ve been pushing out marketing campaigns and press releases specifically geared to marketplace sellers on their site. Amazon will use this opportunity to highlight its marketplace and try to gain the advantages that come with that, and these sellers are going to be able to take advantage.”

Top Retailers Must Compete With Their Own Value Proposition

Many larger (or smaller-but-bolder) retailers will act on their own, but still will look to capitalize on the Amazon spending frenzy by running their own promotions and offerings. Tier 1 brands such as Walmart, Best Buy, Macy’s and JCPenney are among the retailers participating in Prime Day campaigns of their own.

“You’re at the mercy of essentially one-click competition at this point,” said Tom Caporaso, CEO and Director of Clarus Commerce in an interview with Retail TouchPoints. “These retailers have to figure out if the answer is an enhanced loyalty program or improvements to the customer experience such as the usability of the web site or mobile site. They have to compete, because at the core, Amazon is a technology company. They will always push the envelope on technology with the customer always at the forefront of their thoughts, and each individual retailer has to play to its own strengths and compete in a way that makes sense for its own business model.”

Whether they are working with Amazon or actively competing against it, retailers need to understand that the e-Commerce giant affects them regardless of what products they sell. Yet as many as 43% of retailers believe they don’t compete with Amazon at all, according to research from Bluecore. This is an indicator that many retailers are still in denial about the impact Amazon is having on their business.

As Alexa Takes Bigger Role, Retailers Must Understand Voice-Activated Shopping

Alexa has continued to play a major role in Amazon’s business model throughout the year, so retailers should expect more of the same on Prime Day. In 2017, 25.1 million people in the U.S. will use an Amazon Echo at least once a month, up 123.9% over last year.

Amazon already dominates the voice-enabled speaker market in the U.S., capturing 70.6% of users through its products such as the Echo and the Echo Dot. In comparison, Google Home has 8.5 million users, or 23.8% of voice-enabled speaker users. This wide gap gives Amazon a stranglehold on perhaps its most important resource: customer data.

Caporaso noted that despite their technology gap with Amazon, other retailers are going to have to figure out how they can leverage voice-activated platforms to their own benefit on both Prime Day and beyond — whether for brand awareness, selling more product or driving marketing and advertising campaigns.

“The companies that test a lot and have the DNA around testing and learning, versus many legacy retailers that sit on their hands a bit and are doing well, but aren’t really innovating — ultimately those [legacy] retailers will start to fall down the list,” Caporaso. “The ones that are testing and optimizing will ultimately figure out what works and what doesn’t, and continue to push forward based on that data.”

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