Amazon kicks off its third Prime Day event

At 6pm yesterday evening, Amazon kicked off Prime Day for its third year. For 2017 the retailer has extend the event from 24 hours to 30 hours, capturing Monday evening as well as the whole of Tuesday.

Prime Day is of strategic importance for Amazon. Other than the sales spike and PR boost the event provides, the key characteristic of Prime Day is that it is exclusive to the retailer’s Prime subscribers. These shoppers, who pay £7.99 a month in return for free next day deliveries and access to Amazon Music and Amazon Prime Video (among other benefits), are highly lucrative to Amazon. Having paid their monthly sub, access to free next day delivery makes Amazon a highly convenient and price competitive option for shoppers, allowing the retailer to command a level of loyalty that rivals can only dream of. We see in our own research that while 16% of all Amazon shoppers use the retailer at least once a week, this rises to almost half among Prime subscribers. This means that Amazon can afford to price aggressively on Prime Day, able to offset any gross margin pressures against the additional long-term value gained from new Prime subscribers.

As a broader point, we watch with interest to see how competitors respond to the event. Last year Argos offered its Fast Track (free same day delivery) service for free on many items, as well as discounts. eBay and Curry’s also sought to capitalise on some of the buzz created by Amazon with their own promotions. This raises the question of whether Prime Day could evolve into a broader summer time Black Friday event over the next few years. While that is yet to be seen, what we do know is that Prime Day is timed to celebrate Amazon’s birthday – and more of the retailer’s competitors will be keen make sure they get a piece of the birthday cake!