Think Amazon's Prime Day #Failed? Think again

By Daphne Howland | July 17, 2015

"Disappointment" was the word of the day in most post-Amazon Prime Day coverage. The Wednesday sale (some would say "gimmick") exclusive to Amazon Prime members was promised to outshine Black Friday, and offered a wide range of products, from electronics to dog muzzles and shoe horns. 

Onlookers tried to unpack the day-long event based, more or less, on social media commentary, which mostly ranged from snarks to yawns, though many people did find deals they were happy with.

But, hold on. Experts have told Retail Dive that this negative perspective more or less misses the point of Prime Day. Although the day may have failed to impress some people, it was more about attracting new customers to its Prime membership, a goal it seems to have realized.  

What Amazon could have done better

Let’s get this out of the way: yes, Amazon could probably have done better on Wednesday. Rob Garf, a retail strategist with cloud-based e-commerce platform company Demandware, told Retail Dive that it was “a bit surprising that Amazon missed the mark in many consumer’s eyes.”

“Sales holidays, such as Amazon Prime Day, are much more than creating pretty pictures and tag lines,” Garf says. “The buzz around yesterday’s event highlights the need for careful preparation in areas like demand forecasting so that customers are not disappointed.”

Wal-Mart, which made a point of staging its own, rival sale on the same day,reportedly beat Amazon at its own game. But, did it, really?

Certainly, none of these stories are based on actual numbers. For all that Twitter snark, there were plenty of deals to be had, especially if you were in the market for an Xbox, a television, or camera equipment. Kindles and GoPros seemed to fly out the door. There were deals on loads of regular consumer products, too, that probably saved a lot of people a trip to the grocery store. People won't be waiting long for that stuff, either, with free two-day shipping on most things and free same-day delivery in some places. 

Amazon actually accomplished a lot on Prime Day, our experts say.

Attracting lifelong customers 

There are two major reasons that the so-called disappointment matters less than many may think: first, not everyone was disappointed, and, second, the event was, actually, meant to introduce Amazon’s unique ecosystem to consumers who aren’t already Prime members (and had to sign up for at least a trial membership).

And for that, it was likely a good day indeed.

“I see a lot of reports have come out saying that people haven’t got the deals they expected,” Shmuli Goldberg, marketing director at pricing platformFeedVisor, told Retail Dive. “But look at the amount of deals on Prime Day, in every single category. This wasn’t just Black Friday, with deals at the high end — televisions, mobile phones. The deals were spread through the whole range. And I believe that the reason Prime Day was what it was is that once Amazon gets a customer in, they’re a customer for life.”

New Prime members trump sales

It’s not just new Amazon customers that flocked to the site Wednesday, but also new Amazon Prime members, given that membership was required to access the deals. Amazon likes those customers, who have now become nearly half of its U.S. customer base, because they spend $1,200 there each year on average, while non-Prime customers spend $700.

“I think this is a real fantastic way for Amazon to make hay during the dog days of summer, that lull in retail between Father’s Day and ‘back to school,’” says Garf. “This provides a way for Amazon to drum up demand and increase their Prime members. I could have reversed those — the major reason is not necessarily sales but to attract new customers.”

For Amazon's part, the day was a huge success, and the retailer plans to do it again next year — and probably for years to come. 

Amazon Prime VP Greg Greeley said that "hundreds of thousands" of new Prime members signed up, and that customers ordered nearly 400 items per second. Worldwide, ordered rose 266% year over year, and were 18% over Black Friday.

"After yesterday's results, we'll definitely be doing this again," Greeley said in a statement Thursday.

By definition, the Prime Day’s deals applied just to Prime members. And while Wal-Mart attempted to make hash of the very idea in a blog post on its site Monday (“We’ve heard some retailers are charging $100 to get access to a sale. But the idea of asking customers to pay extra in order to save money justdoesn’t add up for us.”), studies show that Prime members do love their Prime memberships.

In fact, if Wal-Mart were to be honest, they’d have to admit that the idea does “add up” to them. For one thing, it’s what its membership-based warehouse retail unit Sam’s Club uses. And the retailer is also considering a “Shipping Pass” membership for its website that will require a $50 annual fee.

In any case, in order to get any of the deals Amazon and its marketplace sellers were offering yesterday, non-Prime members had to try out the service. That means they saw first hand how many items are eligible for free two-day shipping. They will be able to try out the entertainment streaming service and the music streaming and download service. Maybe they'll upload photos to their free Amazon photo storage. If they stick around, they might come to the conclusion that 44 million U.S. Amazon customers have: Prime is worth $99 each year. And that’s true even when Amazon’s prices aren’t the lowest.

Best value vs. best price 

In fact, Goldberg and Garf say, many people don't realize that Amazon isn’t interested in having the lowest prices on the web.

"Amazon has created a phenomenal moustrap," Garf says. "Shipping, payment information, past purchases—all personalize the experience. Consumers are more inclined to take advantage of convenience than price. We all talk about customer experience and service, but customers are time starved, they want value and convenience. Amazon and Amazon Prime give shoppers value and convenience.

"They're the next generation department store, with not only an amazing product assortment but amazing categories, especially with the increasing movement with same day delivery," Garf continues. "They are as big an on-ramp to the Internet as Google and Apple are."

The retailer is far more interested in providing the best value than the best price, Goldberg agrees, and that might be an eye-opener for incoming web retailer Jet, which has staked much on promising that.

“It’s a psychological move,” Goldberg says. “We have the numbers: Less than 12% of online shoppers are purely price sensitive. Think how many are willing to pay more for the identical item. We’re talking the same — same brand, same packaging — from a seller they trust more.”

And Amazon has figured out all kinds of ways to add value, Goldberg notes. Its algorithms mean that past purchases quickly add up to suggestions that make sense to customers, and provoke purchases. Its payment process is fast and easy, something that other retailers could improve. 

Then there’s Amazon’s increasing array of delivery options. “In New York, Amazon Prime means two-hour shipping for free,” Goldberg says. “Add in the movies, the music, the additional Prime membership perks — Prime Day was the perfect ambassador for that.”