In its third year, Amazon.com Inc.’s Prime Day has become a retail industry sales holiday that rivals the likes of Black Friday and Cyber Monday in terms of driving shoppers online to shop.
“If the other retailers have a significant presence online, then they can expect what we call ‘spillover traffic,’” says P.K. Kannan, professor of marketing science at the University of Maryland’s Robert H. Smith School of Business. “This is similar to the traffic that is created in a mall by a huge sales [event] at Macy’s, for example. Other stores nearby might benefit from the traffic in the mall.”
Prime Day will be July 11, a Tuesday, Amazon confirmed Thursday morning with emails to customers and an announcement on its website. This year’s event technically begins on July 10, with a 6 p.m. Pacific kickoff time and lasting for 30 hours, ending at midnight Pacific on July 11.
Amazon held its first Prime Day on July 15, 2015, to celebrate its 20th anniversary and to drive consumers to sign up for Prime memberships, which cost $99 a year for perks that include free shipping and streaming video and music. Amazon now has 80 million Prime members in the U.S., up 37.9% from 58 million last year, according to the most recent estimates from Consumer Intelligence Research Partners (CIRP). More Prime members means more business for Amazon. Prime members spend more—$1,300 per year according to CIRP—on Amazon than non-Prime members ($700).
Experts say Amazon, No. 1 in the Internet Retailer 2017 Top 500, isn’t the only retailer that benefits from the Prime Day shopping event.
“In a broader sense, Prime Day encourages people to shop online,” says Mayukh Dass, an associate professor of marketing in the Rawls College of Business at Texas Tech University. “Customers will focus on products on the Amazon website, but not all products are attractive. This may push customers to check out other retailers.”
Shoppers can expect other retailers to follow suit with promotions, much as they have in the past.
Last year, 23 of the 50 largest non-Amazon retailers in the U.S. ran an online sale in conjunction with Prime Day, including the likes of Wal-Mart Stores Inc. (No. 3), Dell Inc. (No. 4), Macy’s Inc. (No. 6) and Kohl’s Corp. (No. 18). None directly mentioned Amazon in their promotions, although Best Buy Co. Inc. took a not-so-subtle jab in its marketing messaging, specifying that its promotion was “Deals for all. No membership needed.”
Texas Tech’s Dass says keeping Amazon out of any marketing messages may be the smart play for retailers. “They should avoid making it an ‘Amazon Rivalry’ event, and make it more like a customer-focused event,” he says.
Kannan says the reach of Prime Day almost forces retailers to run their own sale or risk being ignored by shoppers.
“Doing nothing can be worse [than trying to compete], as some of their own consumers might start shopping at Amazon and thus you end up losing your core base and loyal shoppers,” he says. “This is something other retailers will want to avoid.”
Prime Day 2016 produced Amazon’s biggest sales day ever, with the retailer generating an Internet Retailer-estimated $2.5 billion in sales globally on that day alone, up from an estimated $1.5 billion the previous year. Amazon does not release exact sales figures for Prime Day.
While Amazon remains the primary focus of its self-created summer sales holiday, there’s evidence suggesting that there is, in fact, a traffic and sales spillover effect to other retailers on Prime Day.
Data from Hitwise, a division of Connexity, showed that last year Macy’s posted a 41.1% week-over-week online traffic spike while Walmart posted a 20.7% increase. Walmart ran a three-day sale to coincide with Prime Day 2015 and said at the time that it produced some of the retailer’s biggest online sales days.
While experts say it would be wise for retailers to offer deals of their own to counter Prime Day and thus capitalize on some of the potential spillover traffic, they caution against getting into a price war with Amazon.
“From other retailers’ perspectives, the danger is slicing their margins so thin that this event becomes a race to the bottom, and surviving on discount alone is not sustainable in the long term,” says Amanda Nicholson, associate dean for undergraduate programs at Syracuse University’s Martin J. Whitman School of Management.
Kannan says when thinking about how to approach the day, retailers need to consider the future rather than try to simply generate one-time sales.
“The key question is whether this strategy borrows from future sales,” he says. “That is, shoppers just advance their purchases and do not spend as much later.”