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Flash Reports 8 minutes

Amazon Prime Day: A Mixed Response in 2016

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Coresight Research

Key Points

  • Fung Global Retail & Technology began covering the second annual Amazon Prime Day starting at its launch at midnight Pacific Time (PT) today.
  • The response to this year’s deals appears initially to be mixed. Lackluster early traffic estimates in the US and the UK have been offset by a strong tailwind of 43% estimated growth in Prime membership year over year.
  • Fung Global Retail & Technology is maintaining its daily sales estimate of $525 million, up 26% from last year’s $415 million estimate, owing to increased awareness of the event this year and the strong estimated growth in Prime membership year over year.

Coresight has been covering Amazon Prime Day since it was launched in 2015 and additional reports from can be accessed here.

FUNG GLOBAL RETAIL & TECHNOLOGY’S TAKE

Fung Global Retail & Technology found that customers’ initial response to Amazon Prime Day was mixed. Despite the PR blitz leading up to this year’s event, ChannelAdvisor reported that US sales were flat and that UK sales were up 11% as of noon ET, which was likely due to a combination of the significant deals offered ahead of Prime Day and the difficulties some customers had at checkout early on. An estimated 43% year-over-year increase in the number of Prime members is likely to offer a major tailwind in driving revenues, and Fung Global Retail & Technology is maintaining its estimate of $525 million in daily sales, up 26% from last year.

BIGGER PRIME DAY THIS YEAR

Amazon promised to offer 100,000 deals for its Prime members during its Prime Day global sales event this year. The company said it would offer a new deal as often as every five minutes throughout the day, a faster rate than last year, when it offered a new deal every 10 minutes.

Amazon offered three different types of Prime Day deals: spotlight deals (which cover major brands and popular products), lightning deals (which were valid for a few hours at a time), and other savings and sales. Spotlight deals were the best deals of the day, according to Amazon. Below, we show some of the top spotlight deals offered in the early hours of Prime Day. They included a number of electronic products that were discounted by 30% or more.

Source: Amazon.com

Lightning deals were available for a limited time, typically a few hours, and consumers needed to claim them as fast as possible. These were mostly lower-priced, everyday items, and they made up a large part of the Prime Day deals. Early in the day, the most popular items—claimed within an hour of the deals having been announced—were accessories, toys and products for children, as shown below.

Source: Amazon.com

The Prime Day savings and sales offerings varied, with most items on sale for 20%–50% off. In the early hours of Prime Day, a Lenovo Flex laptop, a Swarovski necklace and the Call of Duty video game were promoted as savings and sales items, along with many others.

Lastly, Amazon device deals were allocated prime space on the Amazon site; these deals included 28% off the Amazon Echo and 33% off the new Fire tablet.

PRIME DAY DEALS

During the day (US time), Amazon offered the following:

  • Spotlight deals included an Xbox bundle, Roomba robotic vacuums, pressure cookers, Lenovo desktops and laptops, Bose headphones, KitchenAid mixers, toys, SanDisk memory cards, Huawei smartphones and watches, Segway transporters, and other household and summer items.
  • 30% off clothing, shoes, jewelry and more.
  • 50% off selected luxury and beauty products.
  • Deals on Amazon devices, including 28%–38% off the Amazon Echo, Fire TV Stick, Fire tablets, Fire TVs, the Amazon Tap and Kindle tablets.
  • 50% off Fossil wearables.
  • Other discounted items included Amazon videos, the Kindle Unlimited reading package and a free seven-day trial of the Starz subscription TV service.

Clothing was notably featured on Amazon’s home page on this year’s Prime Day, reflecting the company’s emphasis on apparel and fashion. Amazon Fashion was a sponsor of New York Fashion Week last week, and the company began quietly marketing its own private-label brands of apparel in February.

Source: Amazon.com

Other compelling tech deals available late in the day included:

  • The Amazon Echo, priced at $129.99 (28% off).
  • The Doom video game for PlayStation 4, priced at $29.99 (50% off).
  • Bose SoundSport in-ear headphones for $49.95 (50% off) and Bose SoundTrue around-ear headphones II for $99.95 (44% off).

DEALS OFFERED EARLIER

In order to generate enthusiasm in the days leading up to Prime Day, Amazon offered daily deals July 5–11, with a particular theme on each day:

July 5—Summer Entertainment

July 6—Tastes of Summer

July 7—Summer Travel

July 8—Gadgets on the Go

July 9—Outdoor Living and Summer Parties

July 10—Wardrobe Essentials: Back-to-School and Summer Fashions

July 11—Summer Basics

It is possible that many consumers took advantage of these deals, which could have diluted their enthusiasm (and bank accounts) prior to Prime Day. Also, other retailers such as Walmart were ready to jump on Amazon’s bandwagon this year, and a number of them offered competing deals.

A PAUCITY OF TVs

Amazon had said it would offer twice the number of TV deals this year as it did last year, but its TV offerings appeared to lag its claim.

The killer deal, which the company began offering on July 5, was a bundled 32″ LCD TV with an Amazon Fire Stick for $119.99 (the Fire Stick alone retails for $39.99).

Other TV deals included:

  • A 55″ Samsung Curved Ultra HD Smart LED TV for $649.99 (sold out).
  • A 32″ Roku 720p Smart LED TV for $119.99 (45% off).
  • A 43″ Hisense 4K Ultra HD Smart LED TV for $299.99 (18% off).

PROBLEMS AT CHECKOUT

At 8:40 a.m. EDT (5:40 a.m. PDT) on Prime Day, Amazon acknowledged that some customers were having problems checking out, but the company later informed Fortune that the problem had been resolved.

Source: Twitter

Although it is unfortunate to have technology issues on such a big day, the issues were resolved fairly quickly, and other retailers such as Target and Best Buy have successfully rebounded from similar types of problems.

STRONG TAILWIND FROM GROWTH IN PRIME MEMBERS

Fung Global Retail & Technology expects solid results from this year’s Prime Day, supported by estimates of a 43% year-over-year increase in the number of Prime members. Research firm Consumer Intelligence Research Partners (CIRP) recently offered two updates:

  • Prime members spend $1,200 per year, on average, more than twice the $500 spent by nonmembers.
  • There were an estimated 63 million Prime members as of June 2016.

The graph below shows CIRP’s estimates of the number of Prime members, which the firm suggests grew at a 45% CAGR from December 2013 through June 2016.

Source: CIRP

SOCIAL MEDIA SENTIMENT—MORE POSITIVE THAN NEGATIVE

Last year, Amazon received harsh criticism from some shoppers about the standard of Prime Day offers. For instance, some were disappointed to see discounts on socks and diapers instead of on big-name electronics. This year, Amazon promised to improve the quality of the deals offered on Prime Day, and it seems to have delivered on this so far.

Shoppers have seemed quite pleased with this year’s array of Prime Day deals. The shopping event kicked off at midnight PT, and #PrimeDay became the top trending Twitter hashtag within about two hours. The event has gained much positive attention so far today, but a few critics have been vocal on social media, too.

Source: Twitter

RESPONSE FROM WALMART AND OTHER RETAILERS

In response to Amazon Prime Day, other retailers are running competing promotions today. Walmart is offering free shipping with no minimum order this week as well as “rollbacks” (discounts) on 2,000 items for a 90-day period. Many of the rollbacks are on electronic products. Below, we highlight some of Walmart’s more attractive rollback offerings.

Source: Walmart.com

Target continues to run its “Summer Sale,” offering up to 30% off across various departments. Best Buy ran discounts on several big-ticket electronics categories, including HDTVs, gaming consoles and large home appliances, while highlighting the fact that “no membership [was] needed.”

eBay’s response was less muted than last year. The company took the opportunity to make a clever joke at Amazon’s expense by reminding shoppers that it always offers deals. A graphic on its home page read, “Exclusively for Everyone: 4X our top deals. Free shipping. No membership required.”

Toys “R” Us also launched a July 12 promotion, offering free shipping on orders of $19 or more, a 15% discount on its e-commerce sites, and a total of more than 50,000 toys and baby products on sale worldwide.

STAY TUNED FOR MORE UPDATES

The Fung Global Retail & Technology team will continue its coverage through the end of Prime Day and share its analysis of the event’s results.

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