Amazon's Prime Day 2019 is kicking off, and before all of those impulse purchases and deals you can't refuse, it is worth pondering the business strategy behind the sale.
Yes, folks, there's a strategy, a business cadence and key items to know. Here's what you need to know about the business of Prime Day and the method behind the madness.
Prime Day is about creating a flywheel of subscribers and recurring revenue. Prime Day is a massive sale that's designed primarily to entice folks who aren't Prime subscribers to take the plunge. This Amazon mission will be front and center on every Prime Day until its Prime household penetration approaches 100%.
Amazon loves its Prime subscribers because they buy more stuff, consume more content, provide more data, and have more lifetime value. Cowen & Co. estimates that Amazon had 63 million Prime subscribers and 44% of them planned to buy something on Prime Day with another 42% undecided. Cowen & Co. estimates that about 10% of non-Prime households will sign up on Prime Day.
Prime Day is a big advertisement for Amazon logistics. Free one-day Prime delivery is now available on more than 10 million products, and many of them will be on sale on Prime Day. What's notable here is that Amazon can get a wide swath of people on the one-day shipping bandwagon in July and make that delivery speed an expectation for Black Friday and the holiday season. Add it up, and Amazon's competitive advantage is its logistics vs. other retailers.
Amazon's Prime Day may also serve as a case study for Amazon Web Services. Remember Prime Day 2018's outages? Last year's Prime Day was best known for cute dogs and 404 pages. The details of that outage weren't revealed, but Amazon's statements were very clear that AWS wasn't to blame. The truth is Amazon's e-commerce operations weren't entirely on AWS, and that's no surprise given how large the company is and how it developed systems pre-AWS in many cases. But since Prime Day 2018 AWS has migrated off of Oracle and likely moved more infrastructure to its cloud unit. While rivals -- notably eBay -- are touting outage sales, it's unlikely that Amazon's Prime Day 2019 is going to hit many hiccups.
Prime Day 2019 will position Amazon as a broader retailer. One thing worth noting about Amazon's Prime Day this year is that it will tout more top-tier brands and collaborations with athletes and celebrities. Previous Prime Day deals often revolved around Amazon's brands and devices.
Rival retailers are getting smarter about Prime Day. Adobe had a few key stats on how big retailers are better able to convert Prime Day traffic. Consider:
Big retailers are getting better at converting Prime Day interest into sales.
Retailers are already growing to get a Prime Day lift in sales, but ones that are below benchmarks get no gain.
Buy-online-pick-up-in-store is a key defense against Prime Day, and consumers are using those services more.
Email is the most valuable engagement technique on Prime Day for Amazon rivals. Retailers with a strong email channel will see a 8.8% lift in orders originating from email.
Echo proliferation aided by Prime Day. Recent Prime Days have highlighted discounts on Echo devices. Those sales drive more engagement with Alexa, which then becomes smarter. Ultimately, the voice could be the shopping channel of choice. In any case, Amazon's flywheel for Prime Day includes a heavy dose of Echo devices. Amazon will likely push upgrades of Echo devices as well as more penetration for its smart home plays and services.
Prime Day gives Amazon a booster shot in its bid to take on Walmart in dominance. Evercore ISI Research is projecting that Amazon will approach Walmart's 10% of US market share around 2022. Prime Day doesn't hurt that cause. Here's a look at Evercore's market share projections.
Best Amazon Prime Day 2019 deals
Early Prime Day deals
Check out all the early deals that kicked off last week -- many are still available:
The Monday Morning Opener is our opening salvo for the week in tech. Since we run a global site, this editorial publishes on Monday at 8am AEST in Sydney, Australia, which is 6pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and North America.