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Retail Channels
14 July 2022
Americans spent nearly $12 billion on Amazon's biggest Prime Day yet
Amazon and third-party sellers reported big numbers. Here's what worked.
Prime Day 2022 was Amazon's biggest. (Courtesy photo)
Amazon Prime Day delivered the two largest days for US ecommerce in 2022.
According to the Adobe Digital Economy Index, US online spending on July 12 and 13 totaled $11.9 billion. This represents 8.5% growth when compared to last year’s total US Prime Day revenue.
Amazon launched Prime Day in 2015, and the ecommerce platform is the primary destination for deals over the two-day event. Adobe's measure of overall US revenue reflects how the day has become so massive that it lifts all in ecommerce, as other retailers hold their own deal events while others double down on marketing at a time when shoppers are interested in buying. Compared to an average June Day, Prime Day brought a lift in online spending of 141%, according to Adobe.
Here’s a breakdown of the two days, according to the Adobe Digital Economy Index:
- July 12: US ecommerce sales totaled $6 billion, which represented year-over-year growth of 7.8% when compared to the first day of Prime Day in 2022.
- July 13: US ecommerce sales totaled $5.9 billion, which represented year-over-year growth of 9.2% when compared to the second day of Amazon Prime Day in 2022.
When it comes to categories that offered the most deals, Adobe said that toys and apparel had the highest volume.
“With ‘back to school’ around the corner and promotional discounts being quite favorable for consumers, we saw accelerated growth momentum for days that have historically produced significant spending,” said Pat Brown, vice president with Adobe.
For its part, Amazon said it had its biggest Prime Day yet on at least two measures: Prime members purchased more than 300 million items worldwide, and saved over $1.7 billion, the company said. The company did not share exact sales figures.
Amazon said the top-selling categories in the US were consumer electronics, household essentials and home. The company listed more top-selling worldwide products as follows:
Some of the best-selling items worldwide this Prime Day were from premium beauty brands, including LANEIGE and NuFACE; Apple Watch Series 7; diapers and wipes from Pampers and The Honest Company; kitchen essentials from Rachael Ray, Le Creuset, and Hamilton Beach; VTech and LeapFrog toys; Vital Proteins Collagen Whey; Levi's apparel and accessories; Chemical Guys car wash products; and pet products from NUTRO, TEMPTATIONS, and GREENIES.
Amazon said sales growth among the small and medium-sized businesses that make up the platform’s third-party seller community outpaced the uptick for its own retail business.
When compared with 2021, Prime Day results exceeded expectations with sellers, even among those who did not arrange any official Prime Day deals, said Jon Elder, who consults with Amazon sellers as founder and CEO of Black Label Advisor.
“Sellers experienced incredible sales numbers during Prime Day,” said Elder. “This was driven by the fact that so many are overstocked and had extra attractive deals. While sellers might not have made their desired profit margin for Prime Day, they moved an incredible amount of inventory.”
There was widespread Prime Day Deal creation in sellers’ catalogs, as they put forward steep discounts to move stale inventory that was mismatched to trends due to supply chain delays. Along with more deals, Elder said he saw sellers increase PPC budgets by 2-3x on average for maximum visibility to attract as much traffic as possible. Even sellers who did not have any Prime Day deals or increased PPC budgets saw sales reach 3x an average day on Amazon. To stand out in organic search results, sellers also turned to coupons to offer 5-15% off or $1-5 off, depending on the product’s price.
When it came to promotional strategies on the wider web, Adobe said email, paid search and social networks saw the biggest increase in revenue contribution lift during Prime Day.
Amazon itself unfurled a bevy of strategies to attract shoppers, as well. It put a big push behind its livestreaming platform Amazon Live, which attracted 100 million views during the two days. The effort also included looking beyond its own ecosystem. While some commented before the event that Amazon marketing wasn’t as visible as in past years, it might be the case that it was more targeted than usual. Elder said it was clear that the company turned to influencers on social media platforms such as Instagram to promote Prime Day.
“What’s even more interesting is that depending on the social media influencer, they promoted the best Deals in a category that fit the demographic for their following,” Elder said. “I truly believe this was something that moved the needle in a big way this year. Expect even more promotion through influencers in 2023.”
The trove of discounts offered through Prime Day was likely a welcome relief to shoppers who have been seeing rising prices on goods for months. As Prime Day was entering its second half on Wednesday, the US Bureau of Labor Statistics reported that the US inflation rate increased to 9.1% in June, marking the latest in a series of 40-year highs this year.
“Americans were out for a deal with historic inflation and sellers delivered,” Elder said. “In many ways, it was an impeccable timing by Amazon.”
The continued success of Prime Day despite pressure on consumer wallets offers a reminder that shoppers won't necessarily stop spending. Rather, they will change their priorities in how they evaluate what to buy.
“It’s apparent that consumers are incredibly price conscious, and it will be important for retailers to leverage price effectively, in order to unlock new growth potential online,” Adobe’s Brown said.
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Shopper Experience
03 February
Can Amazon cut and grow at the same time?
The company is pulling back after breakneck pandemic expansion. Will it sacrifice the shopping experience along the way?
Amazon is in a period of rebalancing.
The company has long scaled at a relentless pace as it sought to not only provide a marketplace for commerce, but the infrastructure that enabled it, as well. Amazon found another level of overdrive over the last two years, as demand spiked to unseen heights during the pandemic and the company tried to build to keep up.
This wasn’t necessarily a period that saw the kind of invention that Jeff Bezos made an existential tenet of the company, but it nonetheless seems to be shaking out as a cycle that included risk and fallout.
In this case, the risk was not a new device like a smartphone or a move to bend the future to Amazon's will like drone delivery. Rather, it was an expansion that took its already-vast operations to new heights.
Nowhere was this more evident than the company’s logistics network. As CEO Andy Jassy described it to analysts Thursday on an earnings call, the company doubled the size of a fulfillment network it took a quarter-century to build in two years. It also built out a last-mile delivery network that was the size of UPS, which is one of the top two carriers in the U.S.
In 2022, all of that expansion ran into 40-year-high inflation, war in Ukraine and a pullback in demand for goods amid reopening. The company first admitted the problem: It had overbuilt.
But the solution is not to tear down. It had to keep expanding as only Amazon does, while still cutting back in a period of “belt-tightening,” as executives have put it.
That’s evident in watching developments out of the logistics network alone. Amazon pulled out of some areas, and canceled plans to expand into some new warehouses. Yet, as Business Insider reported, it still added 79 million square feet – a footprint that is equal to half of next-closest competitor Walmart’s entire distribution network. It is also expanding Buy with Prime, a new program that will allow direct-to-consumer brands to offer Prime benefits, and, by extension, access to Amazon’s logistics network. Another service, called Amazon Warehousing and Delivery, is designed for upstream storage, necessitating more space to be made available in the network.
At the same time, it will seek to keep doing more for consumers.
Jassy indicated as much when he was prompted to outline his priority areas. Beyond cost-cutting, he said speed is the second highest priority for Amazon. As if to conform this, he said later in the call that one-day shipping is getting off the ground in North America.
Selection is another priority area. At Amazon, that phrase translates to a few things, but top of mind is “expanding the third-party seller marketplace.” Third-party sellers accounted for 59% of sales in Q4. Beyond sales, Amazon’s work with the sellers who post their products on the marketplace is also lucrative for the company. Amazon allows these sellers to tap its logistics network to offer Prime through the Fulfillment by Amazon program. Its business segment called third-party seller services grew 20% year-over-year in the fourth quarter, right in line with the massively profitable cloud computing division Amazon Web Services.
Price, Jassy said, is another area of importance, especially with the consumer pullback on discretionary purchases being observed amid inflation.
“I think pricing being sharp is always important,” Jassy said. “But particularly in this type of uncertain economy, where customers are very conscious about how much they're spending, having the millions of deals that we put together with our selling partners in the fourth quarter was an important part of the demand that you saw.”
Finally, Jassy cited a priority of improving the customer experience. He said Buy with Prime would give subscribers the ability to use their benefits across the web, and noted that virtual try-on for shoes brings change to the shopping experience.
But it’s in this area that the tradeoffs that may be happening under the surface may rear their head again. GlobalData Managing Director Neil Saunders noted that online shopping generally is becoming “more difficult" on Amazon.
“While the Amazon marketplace is far from a terrible place to shop, it has become more complex and cluttered with a multitude of products, delivery options, and prices levels for shoppers to sift through,” Saunders wrote in note released at the time of the earnings call. “The result is that impulse buying has dropped and that more people are migrating away to other retailers. This is not yet a serious problem as erosion has only happened at the margins, but it is something Amazon will need to address and arrest to prevent further decline.”
Taking a rhetorical step further, the journalist John Hermann wrote this week that a “junkification” of Amazon is taking place, while arguing that “everything is going according to plan" for the company.
He placed the growth of the third-party seller marketplace at the center of this trend. But it also comes as Amazon grows its advertising business, with many taking note of a growing number of ads on the platform. The company also wants to keep growing Prime, and is now using content such as Lord of the Rings and NFL’s Thursday Night Football as key acquisition channels. Both had “record” signups of new Prime members, CFO Brian Olsavsky said.
“We see a direct link between that type of engagement and higher purchases of everyday products on our Amazon website,” he said.
It will have to do each of these things at once, while entering a period that will require it to be “more targeted with its growth ambitions,” as Saunders put it.
"Since its inception, Amazon has had a culture of throwing dollars at many different things to see where they led and what they could learn," Saunders said. "That approach worked well for a younger, fast-growth business. It works far less successfully for a more mature entity. In our view, management deserves credit for recognizing this and quickly responding. However, the shift requires a lot of care because Amazon needs to find a new balance between being ambitious and innovative and being more frugal with its spending – which will be very challenging."
Jassy said the changes of the pandemic made its logistics a "different network." That may be true of the whole company. Rather than an isolated cycle of overbuilding and pulling back, this may prove to be a period that changes Amazon altogether. The bets will still be there, but the risk will be magnified with fewer dollars that don't pay off to go around. As hinted by the logistics buildout of the pandemic and even Buy with Prime, they also may look more operational.
Less delivery robot, more delivery optimization.
As Jassy put it: “We're going to be very thoughtful about how we streamline our costs, and I think you see a lot of that, but we're also going to continue to invest for the long term.”
The recipients of those investments will say a lot about where it wants to head in this next year.
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