The Retail Ripple Effect of Amazon Prime Day

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Amazon Prime Day Shakes Up the Retail Space Long-Term

Ah, fall. Cooler weather, technicolor trees, pumpkin spice everything, and…epic holiday shopping? No, you don’t need to double-check your calendar (although 2020 has had many of us wondering what day it is for a long time)Black Friday isn’t here quite yet. 

We’re talking about Amazon Prime Day, the online retail giant’s annual behemoth of a sale, where Prime members can enjoy steep discounts on just about anything their hearts desire. From humble beginnings in 2015, Prime Day has quickly become a blockbuster event with as much buzz and fanfare as its post-Thanksgiving shopping counterpart.

Typically held in mid-July to shake up sluggish summer sales, Amazon opted to push this year’s Prime Day back to October amidst the logistical nightmare that COVID-19 caused. While a change in date may seem relatively innocuous to the average consumer, this new timeline will actually have several significant impacts on the retail world as a whole. This, on top of the effects Prime Day has on shopping during any other year and compounded by the weight of COVID looming heavy in the air, and product-based businesses everywhere can expect a Q4 shopping season like none we’ve ever seen before.

So what can retailers expect during Prime Day and the weeks following? It’s difficult to say in a year like 2020, but we’ve done our best to make some predictions.

Prime Day Makes Waves

As Prime Day enjoys its fifth year in existence, it’s easily become one of the most influential retail events of the year. In 2019, Amazon saw a 60% increase in sales during the 48-hour shopping extravaganza, according to e-commerce analytics company Profitero. But the monster sale didn’t just bolster profits for its founding entity. Retailers across the country saw an average 57% increase in sales during the event and throughout the remainder of the week. Talk about a ripple effect.

While this year’s Prime Day was initially predicted to see a slight dip in sales increases (down to a mere 51%, reportedly because Prime Day was losing some of its novelty), the annual event is likely to see an even bigger increase thanks to the general influx of online shopping that’s been ushered in by COVID. More on that in just a minute.

Either way, online retailers everywhere can likely expect a nice little bump in sales numbers, both in the short- and long-term. According to Criteo, retailers that rode the Prime Day wave saw the biggest increase in sales last year, peaking at around 30% over the course of the week. When it was all said and done, August 2019 saw a 68% increase in overall sales when compared to June.

A New Holiday Shopping Timeline

Before you get too excited over increased sales to propel you through the rest of Q4, this could have some effects on the holiday shopping season that, if not planned for, could negate the gains made this month.

Traditionally, the holiday shopping season is kicked off with Black Friday in late November. But this year, thanks to Amazon’s decision to move Prime Day back, consumers plan to begin their holiday shopping a full month earlier than usual. While this may initially sound exciting, retailers should be cautious. More money spent now will likely mean less money spent during the rest of the season. Don’t get us wrong, we fully anticipate to see plenty of dollars rain down for the holidays just as with any other year. However, if you find yourself coming up short of last year’s numbers as you analyze year-over-year sales, Prime Day could very well be the culprit.

Another issue retailers could potentially face is inventory. Most retailers stockpile their most popular products in anticipation of the shopping rush, which, in case you missed it, normally starts in November. Shoppers this year will be on the hunt for deals starting now, which means inventory will go faster. Have retailers planned ahead enough to maintain inventory through the end of the year? Only time will tell.

COVID Impacts on Retailers

Speaking of restocking…

Some retailers may still be struggling to even keep certain items in stock due to manufacturing snafus, making an additional shopping event in Q4 a hindrance rather than an asset. You can’t delight customers if you don’t have the products they want. This is only one of several issues unique to COVID that retailers need to be conscientious of.

Another side effect of COVID is the sheer volume of online purchases that have been made thus far. Thanks to multiple waves of shutdowns in many parts of the country, e-commerce revenue in the U.S. has seen a 31% increase from Q1 of 2020 and a 44% increase year-over-year, according to TechCrunch. Some indices have even projected that the pandemic has accelerated e-comm’s growth over brick-and-mortar shopping by as many as five years.

E-Commerce vs. Brick-and-Mortar

While we’re on the topic, where does all of this online shopping hubbub leave stores that don’t sell online? Physical retail stores that don’t offer online purchase options are likely already feeling left out this year since COVID still has people feeling wary to venture out. Depending on where a store is located, some may not even be allowed to open, which could mean huge holiday profit losses across the board. 

But fear not. While brick-and-mortar stores face exceptionally unusual challenges in a year like 2020, there’s still hope for them. Despite the ever-growing e-commerce space, various research around the web suggests that up to 70% of consumers still prefer to shop in-store. Things like being able to sample or try on products, having store associates there to assist, the ability to take the product home right then and there, and ease of returns are all reasons brick-and-mortars are still going strong.

True, all of these things are difficult to offer if stores aren’t open, but in most regions, stores are still allowed to do business in some capacity. One of the biggest things physical stores can do to keep customers coming is having a strong digital presence. Just because you don’t offer e-commerce doesn’t mean you shouldn’t have an amazing website. Showcase products on your website, ensure inventory numbers stay accurate, and keep deals and discounts up-to-date. Now more than ever, you need to give consumers an incredibly compelling reason to leave their homes. Competitive discounts, exceptional customer service, and unique innovations—such as personal shoppers and curbside pickup—will help keep you in the game.

The Logistics of Land Transport

And that brings us to our last point. There’s a huge piece of the e-commerce puzzle that many people don’t consider because it’s, well, terrestrial. We’re talking about logistics. Even though consumers are making online purchases, you still have to get the products to them post-checkout, and until we come up with a way to teleport packages to front doors, that has to be done on the ground.

This is really where Amazon shines with their touted two-day delivery (and, in some cases, next-day delivery). In fact, according to MWPVL International, between the months of March and October of this year, the retail giant added 158 last-mile delivery stations, which are expected to give them even more of a leg up against other national and global brands. Many retailers, even large ones, simply don’t have the kind of funds to open over a hundred new facilities, nor do they have the time this late in the year. 

However, one way stores are fighting back is with curbside pickup. Although it began as a Band-Aid to stave off COVID sales losses, curbside has become a staple for retailers and customers alike. It offers consumers the convenience of shopping online with the added benefit of immediacy in receiving a product. Plus, curbside is a service that retailers of almost any size can implement.

This is the secret weapon being wielded by the likes of Target and Walmart, both of whom are running sales to rival the deep discounts happening on Amazon. The New York Times reported curbside pickup to be a game changer during the pandemic, with Target reporting a whopping 700% curbside sales increase in Q3. And they’re not the only ones. Electronics giant Best Buy reportedly attributed 41% of their nearly $5 billion in online revenue in Q2 to curbside orders.

Riding the Amazon Prime Day Wave

Now that we’ve arrived in Q4 of 2020, it should be clear to everyone that, as our favorite Sesame Street characters would say, “one of these things is not like the other.” This year has certainly brought on a whole host of challenges unlike any we’ve seen before. But, with nearly eight months of a pandemic under our belts, it’s clear that adaptation is, and will continue to be, the name of the game. This is something Amazon has always been good at, and we’re pleased to see other retailers following suit.

It’s sink or swim out there these days, so make sure you’re one of the ones riding the Prime Day wave. Be prepared. Plan ahead. Stay on top of trends. Be nimble. Hone your digital presence. Get creative. As Steve Jobs once said, “Innovation is the ability to see change as an opportunitynot a threat.”

If you’ve read this and feel like you’re late to the game, don’t panic. Our iFocus team is here to help you with all your digital marketing needs. Contact us today to dive in.

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