In an article in The Oregonian, reporter Anna Marum outlines the evolution of Prime Day and why Prime Day has never been about sales, but about loyalty. Clarus Commerce CEO Tom Caporaso agrees, noting that “Prime Day serves as a retention and acquisition event for Amazon, and reinvesting in their customer base reinforces and increases that loyalty.”
As published on www.oregonlive.com.
Amazon’s Prime Day has never just been about the sales.
Retail analysts say the Seattle-based retailer created the annual shopping event primarily to boost the number of Amazon Prime members, who spend more on the site than non-members. It worked. (The third annual Prime Day kicked off Monday night, and as of 3 p.m. Tuesday, Amazon reported that Prime members in the U.S. were ordering more than 6,000 sale items every minute.)
But now that close to a quarter of all U.S. households have a Prime membership, Amazon is using Prime Day to push other parts of its empire, including its growing library of original TV shows and its voice-activated assistant, Alexa.
There’s just one catch: to access the television programs or get the most out of Alexa, you need a Prime membership.
The Growth of Prime
Amazon introduced Prime Day in 2015 as “Black Friday in July,” with deals exclusively for Prime members. By this point, Prime had been around for a decade, offering free two-day shipping, along with e-book rentals, music and video streaming and photo storage for $99 a year.
Afterward, the company hailed the event a huge success and said customers ordered 34.4 million items – or 398 per second – during the shopping event.
At the time, Greg Greeley, vice president of Amazon Prime, said “hundreds of thousands” of people signed up for Prime, joining “tens of millions of existing members.”
Prime Day was an even bigger hit in 2016, with U.S. orders climbing more than 50 percent year over year. In an email, Amazon spokeswoman Julie Law told The Oregonian/OregonLive that 20 million new customers tried Prime last year.
Amazon guards its Prime membership number closely – Law would say only that there are tens of millions of members in the U.S. alone.
But in June, Consumer Intelligence Research Partners estimated 85 million Prime memberships in the United States. If this number is correct, roughly a quarter of Americans have a Prime subscription. By comparison, Netflix has nearly 51 million U.S. members, the entertainment streaming service told its shareholders in April.
Since the inception of Prime Day in 2015, membership has nearly doubled, the firm estimates.
Michael Levin, the group’s co-founder, said that as Prime memberships reach market saturation, it will become harder for Amazon to grow subscriptions.
“This Prime Day’s not going to be quite as good as last year,” he said. “Not because of how they’re doing Prime Day, but because they’re running up against mathematics.”
Mathematics also drives the campaign: Prime members spend about $1,300 a year with the company on average, Levin’s firm has found, compared with about $700 for non-members.
The Complete Ecosystem
Originally, the big lure of Amazon Prime was the free shipping. Then, when the company debuted Prime Day in 2015, the discounted products pushed new customers to join. Now, there are more perks to being a Prime member.
For instance, only subscribers have the ability to order items on Amazon using Alexa, the company’s voice-activated assistant.
This year, Levin said, “Prime Day is like Amazon Alexa day in disguise.”
News releases from Amazon tout the assistant’s abilities: Users can ask it to list off Prime Day deals or even sign up for Prime. Which is handy, because only Prime members can use the device to order items on Amazon with voice commands.
“Prime is better with Amazon devices like the Amazon Echo, Echo Dot and Echo Show,” Amazon’s Greeley said in the release. “And our devices are better with Prime.”
According to Tom Caporaso, chief executive of Clarus Commerce, this self-perpetuating ecosystem is in line with the true goal of Prime Day: rewarding current Prime subscribers and acquiring new ones.
“By rewarding Prime customers, both old and new with exclusive perks and deals, Prime Day serves as a retention and acquisition event for Amazon, and reinvesting in their customer base reinforces and increases that loyalty,” he wrote in a statement.
Charlie O’Shea, an analyst with Moody’s, agreed.
“In our view, Prime Day continues to be focused on further deepening the relationship Amazon has with its Prime members,” he wrote in an email.
But the true value of a Prime membership isn’t access to Prime Day deals, the ability to shop with your voice, or even free shipping, he said. It’s Amazon’s growing list of original TV shows, including Golden Globe winners “Transparent” and “Mozart in the Jungle.” These shows are only available to stream for Prime members.
“We continue to believe that the true value for Prime is on the content side, and to that end, Amazon has been spending significant amounts acquiring and developing content,” O’Shea wrote.
By creating its own holiday, Levin said, Amazon has a built-in marketing tool that it can use to push whatever aspect of its empire it wants to highlight.