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The first Prime Early Access Sale is in the books, and the holiday shopping season is here.
Amazon held the first edition of the deals event on Oct. 11-12, offering a fall sequel to the summer Prime Day event that has driven massive deals for the company since it was launched in 2015.
With a new event held during a different season, it was less clear whether the same impact would arrive. At the same time, the early jump on holiday deals offered a chance to get a look at early trends for peak season. Here’s a look at the results, how it stacked up compared to Prime Day and what it means for the weeks ahead:
What Amazon said
When the event was announced, Amazon had positioned Prime Early Access Sale as a kickoff to the holiday season, and continued to do so in a post-event press release.
“Our Prime Early Access Sale was a great kickoff to the holidays, and the best part is that it’s only the beginning. Customers will find millions of must-have deals throughout the season that will help them continue to save money on gifts for loved ones,” said Doug Herrington, CEO of Amazon Worldwide Stores.
The company shared that “tens of millions of Prime members” shopped during the two-day span.
Amazon said that top-selling products in the US for the event included the LANEIGE Lip Sleeping Mask, Apple AirPods, Vital Proteins Collagen Peptides, and Crest 3D Whitestrips Professional Effects Teeth Whitening Strips.
It added that Prime members ordered more than 100 million items from selling partners on its marketplace, but offered no further totals.
While the release had some breakdowns of top numbers, it did not paint a full picture of the results for the event, and how it stacked up as compared to Prime Day. Here's a look at what the experts found in key areas:
Price and discounts
Deals are always the focus of Prime Day, but their effectiveness and relationship to overall prices is an especially important area to consider at a time of 40-year-high inflation.
Like the summer Prime Day before it, deep discounts were available at Prime Early Access Sale. According to Salesforce data that looked at the entire online shopping landscape during the two days that the Prime event was taking place, the average discount rate was just over 21% for Oct. 11-12. That’s a 25% increase in year-over-year discount rates when compared to the same dates in 2021. Outside of Cyber Week, this is the deepest discount rate that Salesforce has observed since the start of the pandemic.
However, the fact that the event was taking place during a period of high inflation was evident. Despite the steep discounts, consumers were still paying much more than they were in each of the last two years, according to Salesforce. The average retail selling price during the event was up 8% over 2021, and 17% over 2020.
This proved to take a bite out of buying power. Consumers purchased 5% fewer items over the same two-day period in 2021, and 8% fewer items compared to 2020.
With current economic conditions expected to persist throughout the holiday season, this could be a sign of consumer behavior throughout the peak quarter.
"Even with deep discounts, the net price consumers paid at checkout was more than before the pandemic,” said Rob Garf, GM and VP of Retail at Salesforce. “Prices progressively increasing over the last two years means consumers are spending more and buying less. We anticipate the trend of lower consumption – fewer orders at higher prices – will continue through the holiday season."
The halo effect
One way to gauge the effectiveness of a Prime Day is how it lifts retail as a whole. The summer Prime Day has typically produced a halo effect, in which non-Amazon retailers run discounts and see bigger sales alongside the event. Prime Early Access Sale generated plenty of other activity around it, as Target ran a Deal Days sale over the weekend leading up to the event, and Walmart ran its Rollbacks and More event on the same week as Prime Early Access Sale.
Running sales ahead of the event proved to be an effective approach. According to data from Salesforce, US non-Amazon sales during the fall Prime Day event were essentially flat year-over-year, growing only 2%. But in the Thursday-Sunday leading up to the event, online sales grew by 10%. That exceeded the 5% growth Salesforce saw in Q3. Compared to the same period in 2020, sales rose even more to a 19% increase.
It’s important to note that the growth in sales was driven by higher prices that are a result of 8% inflation. Consumers purchased 2% fewer items than they did in 2021 over the same weekend. Nevertheless, it appears that getting out in front of the event yielded success.
Among third-party sellers (3P), price also proved to be the most important factor in driving sales. As with the summer Prime Day, Amazon offered the opportunity for marketplace sellers to run discounts specifically for the event, just like first-party brands. However, these did not have the same impact during the fall event.
“The only real traction is on listings with a promotion for the event,” said Jon Elder, an Amazon seller consultant and founder of Black Label Advisor. “Non-promotion listings are seeing an average ‘lift’ of 2x normal sales – much less than what sellers saw during Prime Day in July.”
The event marked the first time that Amazon held a second Prime Day in one year, and was announced publicly several weeks before it was held. Overall, Elder said participation for the event was low in the 3P community, however, there were advantages to taking part for some.
“For the most part, 3P sellers are skipping this event unless they have an excess inventory issue,” Elder said, referring to the glut of inventory that is being faced across retail as a result of supply chain issues. “Others are using it strategically to boost their Best Seller Rank heading into the holiday shopping season. There was little to no media attention for this event, so sellers were definitely hesitant to participate.”
A key ingredient for Prime Day is buzz. The anticipation leading up to the event is what helps to create success, especially when the duration of the sale event itself is limited. But the lead-up to Prime Early Access Sale didn’t generate the same type of engagement as the summer Prime Day.
According to data from social media software company Sprout Social, Prime Day received three times as many Twitter mentions as Prime Early Access Sale in the week after it was announced, with 8,190 mentions for Prime Day vs. 2,460 for the fall edition. What’s more, interest in Prime Day increased in the week after it was announced, while the interest in Prime Early Access Sale faded. Plus, there was a generally positive sentiment around Prime Day, with 65% of mentions in that camp. Prime Early Access Sale had more of a neutral sentiment, with 79% in that category.
“The data around Amazon’s Prime Early Access Sale suggests possible fading consumer enthusiasm around seasonal promotions,” Mike Blight, Senior Market Research and Insights Manager, Sprout Social. “However, viewing this data more holistically reveals other factors that could have contributed to the decline in volume and sentiment. Announcing a second, similar campaign during the crowded holiday promotion season likely contributed to the lack of engagement around the Prime Early Access Sale.”
To gauge this, Sprout Social applied social listening, which can help brands gauge how consumers react to announcements, as well as general consumer sentiment. This is most impactful when viewed alongside other data such as sales performance and customer feedback, as well as considered alongside seasonal and cultural factors.
By the numbers
A lesser impact for Prime Early Access Sale also showed up in data gathered by market research firm Numerator, which tracked sales for the event from 44,698 Prime orders and 18,890 unique households. Here’s a look at key findings from its tracker:
Average order size during the Prime Early Access sale was $46.68, down from $60.29 on Prime Day 2022.
Of shoppers who took part in both events, 36% spent more at the Early Access event while 64% spent the same or less.
Top categories among these shoppers were household essentials, health & beauty, apparel & shoes and toys & games.
Holiday shopping was not necessarily the goal. 29% of Prime Early Access shoppers used the sale to purchase holiday gifts. Of those gift buyers, 69% say they completed less than half of their holiday shopping, and 95% said they’re likely to shop on Amazon again for additional holiday items.
Inflation also impacted 79% of Prime Early Access shoppers. According to Numerator, 29% say they waited for the sale to purchase an item at a discount, while 26% passed on a good deal because it wasn't a necessity.
GMV estimated at $8 billion
While Amazon did not disclose its overall numbers, Bank of America Securities has released an estimate of the gross merchandise value (GMV) for Prime Early Access Sale that trailed the summer Prime Day.
BoAS Analyst Justin Post estimates the GMV for the two-day event at $8 billion. That's a 25% decline from the summer event, which was estimated at $10.7 billion. The company estimate revenue at $5.7 billion in revenue, compared with $7.5 billion in July.
Post points out that the October sale was not branded as a full Prime Day.
“Ultimately, we view this Early Access event as incrementally beneficial, as both a branding event for Prime and potentially smoothing holiday demand aiding with logistics,” Post said in the note.
This story was updated at 5 p.m. on 10/17/22 to include estimates from Bank of America Securities.
Trending in Retail Channels
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.