Launched in 2015, Amazon uses Prime Day as a very successful tactic to boost sales. This event has set itself as a smaller-scale summer version of BFCM. Total online retail sales in the US during Amazon Prime Day 2021 surpassed $11 billion - 6.1% higher than overall e-commerce transactions generated by the 2020 event. Specifically, the total sales on Monday were $5.6 billion, and on Tuesday, the eCommerce giant achieved $5.4 billion. And these statistics made Monday the biggest day for digital sales this year and Tuesday the second-busiest.
Although the event has grown, shoppers this year have not spent as much on average as the previous year. The average Prime Day 2021 order was $52.33, compared with $54.64 during last year’s event, according to Numerator. Moreover, the percentage of consumers who placed 2+ separate orders in 2021 slightly increased by 0.2%, and the figure for average household spending was around $106.41.
Let's take a look at the following infographics to gain some key insights.
How Has Amazon Prime Day 2021 Influenced Businesses?
Last year, Amazon had to put Prime Day 2020 on hold until mid-October due to COVID-19. At the time, amid a surge in cases in the U.S. and many parts of the globe, Amazon also saw a massive spike in online orders since many physical stores were shuttered and consumers opted to stay indoors to avoid the virus.
Amazon’s Halo Effect - Summary of Findings
Despite soft sales, there was still a positive hallo effect on overall online sales for the month.
In the US, participating retailers drove a sales increase of 48% on June 21 and 38% on June 22. According to Criteo, they managed to increase their market share, as sales were down 7% for non-participating retailers on the first day of the event, and down 3% on the second day. About 30% of US retailers participated in the event. (Source: Criteo)
In Europe, participating retailers generated a sales increase of 45% and 24% on June 21 and June 22 respectively, compared to the average during the two first weeks of June. Non-participating retailer sales were down 14%. (Source: Criteo)
Prime Day is still gaining its footings in much of APAC but had a strong showing in Australia, with participating retailers generating a sales increase of 51% on June 21, 2021. (Source: Criteo)
As Amazon's reach has expanded significantly through Prime Day events, big-box retailers have stepped up to host competing sales in June. Walmart, Target, Costco, Best Buy, Macy's, and others offered up deals of their own to capitalize on the surge in online traffic driven by Prime Day. Target offered a 48-hour Deal Days sale that started on June 20 while Kohl’s offered a 48-hour WOW Deals event that began on June 21 and Best Buy provided a nine-day Bigger Deal savings event on June 14.
Amazon was not the only retailer offering deals on Prime Day. Walmart, Target, and Best Buy all ran their sales events to compete. Target, the only retailer of focus to drop a weekly ad during this time frame, made no mention of their Deal Days event in their flyer– potentially a missed opportunity to attract potential shoppers who do not use email, web, and social to find deals. (Source: Numerator)
Walmart, Target, and Best Buy ran deals on popular Prime Day products that were on par with Prime Day deals themselves. (Source: Numerator)
On the bright side, the game is not for big names only, and the competition in the eCommerce industry has become more intense. As Amazon’s power has grown and been more scrutinized, some smaller e-commerce players have championed themselves as Amazon’s alternatives. For example, New York-based ShopIN.nyc, which pools inventories from local businesses to create a local version of Amazon-like services, advertises itself as being faster to deliver products than Amazon. Retailers such as Express Inc. and J.Crew Group Inc., meanwhile, have in recent years started their marketplaces to reel in brand-loyal customers.
Instead of making use of the halo effect from Prime Day, many brands do not feel the need to slash their prices to compete. For example, Demaco, a brand that sells artisan crafts and gifts on Amazon and other channels thought Prime Day is hopeful to build brand awareness, rather than putting merchandise on sale. Shopify, an eCommerce platform that powers millions of online stores, including big brands like Glossier, considers this shopping event just another two normal days on the calendar.
‘Commerce in 2021 is not about bargain-basement deals anymore...The future of retail is not discounting. It's about connection, it's about authenticity, it’s about having an amazing product, and a great story.’ - Harley Finkelstein, Shopify President.
Small Businesses Prepare For One-Day Delivery
Yet, while not all retailers offer Prime-like deals, many businesses have emulated Amazon to stay competitive. Some small businesses that do not sell on Amazon have felt pressured to provide one or two-day shipping to keep up with customer expectations set by the retail giant. As a result, many had to pack and ship orders themselves as they could not afford a third-party shipper.
Unfortunately, we are going to see a continual weeding-out of merchants that cannot solve the supply-chain piece of online sales. According to The Wall Street Journal, shipping costs, through carriers like UPS, the U.S. Postal Service, and FedEx, are going up between 5% and 7% this year, because demand skyrockets. Considering Covid disrupted supply chains worldwide, store owners have to pay more to warehouse a larger buffer of goods. Meanwhile, demand for faster delivery means retailers have to figure out exactly how many items to store in which warehouses spread out in a network that spans the country.
Amazon Prime Day: Challenges and How to Stay Competitive
Fulfillment and Shipping Strategy
The first challenge that many businesses are facing is fulfillment and shipping methods. As demands are growing, the combination of short supply and rising shipping costs create undue pressure on brands. One solution SMBs could consider is a fulfillment option like ‘click and collect’. Likewise, evaluating packaging size is a must if you want to save money. You need to choose the correct box size that will reduce extra waste for shipping.
In-Store Pick Up is an effective solution that many brands have deployed to avoid late delivery and reduce shipping costs. (Source: Sephora)
Meanwhile, many businesses have turned to platforms such as Shopify to set up their e-commerce operations. This platform gives access to cloud-based third-party services such as payments and fulfillment while allowing e-merchants to control their branding and customer relationships than larger marketplaces. The service also enables businesses to list merchandise on the bigger marketplaces offered by Amazon, eBay Inc., and others.
Unfortunately, fake reviews and inflated ratings are still a problem for Amazon. As Amazon purchases increased, so did review manipulation. Amazon sellers are taking advantage of the online shopping frenzy by using new methods to bolster ratings on products ranging from cordless vacuums to toilet-paper holders. For consumers, this can mean diminished trust and frustration as people tend to pick a winner from a crowded field of low-quality, no-name “five-star” items. Consequently, the lack of authenticity decreases information quality, plus the effective use of online product reviews. Instead of applying this short-term strategy, brands should focus on collecting authentic ones to keep customers coming back to your owned channels for your products, whether you are doing business on Amazon or not.
Here are several handy tips that you should apply to get real feedback from your customers.
- Make your business appear on the local search results. Local listings are generally given preferential treatment where relevant, for example, Google My Business. It allows customers to leave reviews with photos, so high-quality, positive ones can improve your business’s visibility and increase the likelihood that a shopper will visit your location. Moreover, when you reply to their reviews, it shows that you are listening to your customers and that you value their feedback.
- Social proof is not new but still effective. People trust people, not brands. Roughly 90% of consumers say that they count on online recommendations from their family members or friends. What they are looking for is trustworthy content by influencers and verified users.
- Send automatic review requests. Soliciting reviews can be done via email or text if you know the customer’s preferred method of communication.
- Offer a user-friendly review interface. Don’t force consumers to log in or navigate through multiple pages as the complexity can make them upset easily. Instead, you should try to simplify the process as much as possible and keep the scrolling to a minimum.
Advertising Costs Keep Rising
Not only Amazon but other online platforms are increasingly pushing up the cost of advertising, so it is potentially straining the ability of sellers to discount items. Ad costs on Amazon have risen 50% year-over-year, according to research firm Marketplace Pulse. Amazon also implemented tighter limits around the number of inventory merchants can hold at Amazon warehouses, further straining sellers’ pocketbooks. StitcherAds reported that Facebook, Instagram, Pinterest, Snapchat, saw a 47% increase in CPM since March. Worldwide, branded commerce and marketplace apps can now cost companies more than $30 to acquire a new customer.
Since not all business owners have a large budget of $65.9 million to advertise as second-best Amazon did, you should bring customers intuitive and easy-to-use experiences across channels and devices to get consumers and overcome fierce competition.
- Upgrade the shopping experience. You should improve the navigation and site search to lead shoppers to their favored items. Moreover, don’t forget to allow consumers to save their information for subsequent purchases, and eliminate add-to-cart steps by letting them buy directly from the product pages.
- Bring your brand to life. Advertising is not the only way to introduce your products. Think about live streaming shopping events, or do some experiments with augmented reality (AR) or virtual reality (VR), particularly in the fashion industry. According to YouGov, 43% of global consumers enjoy using AR/VR technology to shop for clothing online.
- Prioritize the mobile shopping experience as 61% of customers use mobile devices to shop online.
What to Expect on Prime Day 2022?
Amazon Prime Day has broken its record every year, even during the COVID-19 pandemic. Let’s take a summarized look at the global Prime Day sales from 2015 to 2021.
Global Amazon Prime Day Sales 2015 - 2021 (Source: DigitalCommerce 360)
Sales of this 48-hour event grew between 45.5% and nearly 74% from 2015 to 2019. However, the growth for Prime Day 2021 is only 7.5% compared to 2020, while it is projected to hit 19% year-over-year growth. There are 2 main reasons for the lower sales figures.
- This year’s Prime Day came only 8 months after the last event, a much shorter period than the 15 months between 2019 and 2020. Consequently, we saw a decline in average order size and average household spending.
- Amazon did not expand to any new countries at this year’s event. Also, the retailer postponed Prime Day in both Canada and India because of the countries’ worsening wave of Covid-19 cases and did not offer a rescheduled date in either country.
Already excited for Amazon Prime Day 2022? Here are our predictions for you to get prepared.
Global governments have been investing in vaccine production and calling for faster rollout to achieve herd immunity, so the world could bring the coronavirus under control within this year. Therefore, Amazon will probably expand Prime Day in some new countries, apart from bringing Canada and India back to the list. That’s why we could see the potential for Amazon to gain 19% gross sales growth in post-pandemic recovery.
What about the date? In 2020, the company decided to hold the annual Prime Day in October instead of July as usual, due to the outbreak of COVID-19. This year, the online retailer had concerns over transportation slowdowns and shipping delays in July as it is a vacation month. Moreover, the impact of the Olympics in quarter 3 could affect Prime Day’s progress due to the travel boom so Amazon had landed in June to hold the event. Next year, when everything is back to normal, we can expect that it will be in July as usual.
In terms of promotion deals, according to Numerator, 60% of shoppers were highly satisfied with this year’s deals. Besides, nearly half of consumers agreed that Prime Day 2021 offered second-best deals, just after Black Friday. Let’s take a glance at the top purchased items and categories in recent years.
As we can see, Fire TV Stick and Echo Dot - a smart speaker with Alexa - are always the top items bought on Prime Day 2019, 2020, and 2021. Likewise, Health & Beauty, Electronics, Household Essentials, Home & Garden have been among the most popular categories for shoppers. Therefore, there’s a high chance that these items and product groups will go straight into the chart next year.
It is undeniable that the event has turned into a 48-hour-long eCommerce extravaganza, rivaling Black Friday and Cyber Monday. To many businesses, the Prime Day 2021 halo effect is such a great opportunity to achieve a sales spike. However, it is up to you to decide how you want to work during promotional periods or not to compete with eCommerce giants like Amazon. Instead, there are numerous ways for you to differentiate your business from competitors. As a business owner, don’t forget to weigh up the values of joining the sales season with what it takes to succeed. Once you’ve prepped up and ready, the results will be worth it.