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For the first time in Prime Day history, Amazon will be hosting a second Prime Day event this 2022. This newly titled “Prime Early Access Sale” will take place Tuesday to Wednesday, October 11-12, when Prime members (and Prime members only) can anticipate “hundreds of thousands” of deals.
The timing is no surprise. Several big box retailers, including Walmart and Target, have also recently announced their own earlier-than-ever holiday sales events. As shoppers' incomes are increasingly squeezed, retailers like Amazon are hoping that a longer period will allow shoppers to spread the cost of holiday shopping and encourage more sales.
Will inflation make shoppers hesitant to spend their cash? Deloitte predicts that holiday retail sales will increase by just 4-6%, well below the 15.1% growth rate observed in 2021. In the UK, shoppers are predicted to halve their Christmas spending. Then again, that same study showed that 30% of shoppers have started buying ahead of the holidays to capitalize on deals. Could a second Prime Day event be just the jumpstart Amazon needs to accelerate sales during a time of economic uncertainty?
Are Prime Day events enough to pull Amazon out of a slump?
Last July, Amazon reported sluggish sales and a net loss for the second straight quarter. Revenue was up 7.2% vs 27% the same time last year. The company also lost $2 billion, down from a $7.8 billion profit a year earlier. This was in part because Prime Day took place in Q3 this year, thus Q2 didn’t benefit from the sales boost it would have enjoyed in 2021. Q3 results have yet to be posted, but there’s no question that Amazon is looking to deal days like Prime Day and Black Friday as key opportunities to boost sales. Current forecasts predict that holiday sales will grow from last year, but much of the increase will likely be driven by higher prices. We anticipate that retailers like Amazon are going to go ‘all in’ this year, pushing deeper than ever discounts to encourage penny pinching shoppers on the hunt for big deals to open their wallets.
Could excess inventory harm Amazon?
Supply chain issues have led to disruption in inventory forecasts leading to many retailers - including Amazon - having excess stock sat in their warehouses. Target recently dealt with an inventory glut by slashing prices on the premise that the short-term impact on profit was worth it to push the business forward in the long term. The problem with excess inventory is that it reduces the ability for retailers to stock up on items driving growth - during Q4 that means gifts and gadgets as we head into those “seasonal moments” of Black Friday and Christmas. Could October’s Prime Day be an opportunity for Amazon to offload excess stock in order to make room for products in these high growth categories ahead of Christmas?
Who will be the winners in the Prime Early Access Sale?
As per Prime day traditions, the big focus for this October’s Prime Day event will be Amazon brands, beauty & personal care, clothing, shoes and jewellery, home & kitchen and electronics. With energy prices going through the roof and temperatures dropping, we expect shoppers to be searching for deals on energy efficient products to tackle the rise in energy costs.
How big is the 3P threat this Prime Day?
The event will also be a boon for third party sellers who’ve historically enjoyed great success during Prime Day. In recent years, Prime Day has served as the biggest two-day sales period for 3P sales - last year shoppers spent over $1.9 billion on over 70 million products from 3P sellers during Prime Day. This year, Amazon extended its Prime shopping benefits like fast free shipping to merchants’ own online stores, making it even easier for 3P sellers to leverage the seamless experience that Amazon offers. What brands need to watch out for is retail arbitrage - when 3P sellers buy discounted products through other retailers to sell on Amazon. Arbitrage sellers are more concerned with selling as many products as possible, regardless of the impact it may have on your brand. You can protect yourself against arbitrage sellers by keeping a close eye on your supply chain, limiting cross channel discounts, and enforcing the MAP policy.
Amazon’s is raising fulfillment fees - watch out if you’re a brand selling via 3P
This second prime day offers an opportunity for brands to enjoy a welcome boost to sales ahead of the holidays. But for brands selling via 3P, Amazon has thrown a spanner in the works. To combat inflation, Amazon is passing on some of its increased costs onto merchants. From October 15 until January 14, third party sellers who use Fulfillment by Amazon will have to pay 35 cents per item sold in the U.S. or Canada. This is the first time Amazon has hiked seller fees for the holidays. This adds extra impetus to get rid of surplus stuck before these additional fees are added, eating into your increasingly narrow margins.
On your mark, get set, sell…
Our predictions are based on this year’s trends and the insights we’ve derived from our own data throughout the year. How will it all pan out? We’ll be keeping a close eye as Amazon’s Prime Early Access Sale unfolds. Stay tuned next week for the results.
