Here Comes Prime Day-And-A-Half: What Should Retailers Do?
Amazon’s Prime Day has proven to be such a revenue generator and attention grabber that Amazon is doing again; now the third year in a row. And the company likes it so much they’ve extended it from 24 to 36 hours. Get those deals while they’re hot!
But here’s the thing: like just about every summer sale ever, while it may drive traffic and increase revenue, Prime Day doesn’t seem to do much for the bottom line.
Amazon’s fiscal calendar matches the calendar year, which means Prime Day falls in Q3. In 2016, while revenue was in line with guidance, the company reported a big profit miss. In 2017, while profits were up, predominantly driven by AWS, operating margins were .8%, the lowest since September 2014.
While there were “reasons” given for each of those challenges, to me it’s pretty simple. Summer sales are rarely big money makers. Since time immemorial, they have been designed to drive traffic during periods when people would normally be on vacation, on the beach or otherwise engaged in other activities. In Amazon’s case, shoppers don’t even have to leave the beach…it’s all there waiting for them on their phones and other mobile devices.
As most of you who know me are aware, my father was an independent retailer. January and July presented two different choices for him: close the store for a few days and take some well-earned time off, or run a sale to get rid of excess inventory. Most of the time, he chose to close the store. I don’t know what he’d do if he were alive today. I do know the rules of retail haven’t changed all that much.
The things I’d look for if I were Prime Day shopping (I don’t plan on it) would be school supplies – school starts crazy early in certain parts of the United States – “special unique deals” – the company asks manufacturers to put together special product bundles for them – and maybe odds and ends that I’d been thinking about but hadn’t gotten round to buying.
But what would I do about Prime Day if I were a retailer? Honestly, probably not much. If I had excess inventory, I’d likely get it out there on specials, but the best retailers have already done that. It’s time to make room for Fall merchandise and apparel. Or even Halloween supplies.
Amazon has created “a day.” So has Alibaba with its “Singles Day.” Do I think other retailers need to create those “days” to keep up? I don’t, especially if they’re not going to drop a lot of money to the bottom line, and most especially in the middle of the summer. We are already starting to gear up for the holiday season. There’s a lot of unpredictability around tariffs and when the impact of those tariffs are going to start to hit. So the best thing I can recommend is get your product in and ready for holiday season, take advantage of what might well be the last tariff-free season you’re going to experience, and prepare to create the best customer experience possible.
We know that asking you not to use price as you demand driver is a fruitless exercise…societal addiction to price is too much to overcome at this point. But we can encourage a positive customer experience, a strong assortment and educated and empowered employees.
Perhaps equally important, given continued increases in online sales over the holiday season, this would be an excellent time to do some load testing and tweaking of digital content and commerce applications. Will they hold up under the stress of heavy loads? Are your distribution centers ready to process at peak capacity? Do you even know what that peak capacity is? Have you lined up ancillary storage space to hold back stock close to the point of demand?
Personally, I think these are the most important things to think about between now and Labor Day. Prime Day will make a lot of noise. Noise does not always equate to profits. Do what you can do to insure a profitable and healthy back to school and holiday season. Those are your money makers. You can do it noisily or quietly, that’s really up to you and your brand identity. But most importantly stick to your knitting. Do what will make YOU successful, not what gives Amazon a lot of press.
Amazon may well pull a lot of profits out of its hat this quarter, but I’m still not sure they will. They’ll make a lot of noise, and I’m not sure what else. I am sure that fourth quarter really, really matters to the rest of us. And I’d be working as hard as possible to get ready.