July 13 2017 Thursday at 12:12 PM

What Amazon sellers need to know about Prime Day

SSA Blog

What is Prime Day?

On July 11th, 2017, Amazon.com set a sales record for the company and showed a 60% revenue increase vs last year’s Prime Day.

Today’s entry will cover two subjects -

  1. What does Amazon use Prime Day for?
  2. What should a third-party merchant use Prime Day for?

Most people love a good reason to go shopping.  In the US, Black Friday has become a competitive sporting event.  Who can get the best deals, how quickly can they get in and out of the store, how many items could they nab using every trick in the book?  But Prime Day is about much more than shopping.

Prime Day was created in 2015 to celebrate the 20th anniversary of the launch of Amazon.com.  The public-facing concept of a day of deals for the company’s best customers isn’t revolutionary.  However, Prime Day is much more to Amazon.  For years now, Amazon has been turning itself into a platform, almost like an operating system (OS) like Windows or Mac.  When you are part of the Amazon Prime OS, you don’t need a number of other services.  Prime members get access to video, music, photo and data storage, and more.  Prime Day creates a competitive advantage by bringing more people into the Amazon Prime ecosystem.

Let’s take a look at the top-performing Prime Day items -

  • $35.00 Echo Dot
  • $90 Echo
  • $30 Kindle Fire 7
  • $50 Kindle Fire 8

You don’t need me to explain what these have in common.  They all get the customer deeper entrenched in the Amazon OS.  I couldn’t get around the site at all without having these deals right in my face on Prime Day, and I am already an Amazon customer.  The idea is simple - get more users!  Club Bezos has already told us that Prime customers spend more than non-Prime Amazon customers.  I would love to know how much more the owner of an Amazon device such as Echo spends on Amazon.com vs non-Echo owners.  Judging from Amazon’s discounting and marketing efforts, the number can’t be a small one.

Other technology companies don’t have a “day”, a festival to drive mass adoption.  What is Google day?  Microsoft day?  Apple used to have a similar event with the launch of a new iPhone, but those Apple Store lines have been getting shorter for a while and the buzz isn’t what it used to be around Apple products.  Prime Day is a huge advantage that Amazon has over other technology companies.  It is not about making a profit for Amazon, it is about pushing adoption of Amazon as a technology.

So what should a third-party merchant be using Prime Day for?

This is a much less explored subject.  Why are all these customers here?  Deals?  Necessities?  A new swim suit?  What do you sell and how do your products compare to the needs of the customers flocking to Amazon on Prime Day?  I can speak from personal experience, and I can theorize about things I don’t sell.  Let’s stick to personal experience.  I sell novelty clothing.  It is a discretionary purchase, nobody NEEDS my items.  Discounting them 10-20% often does nothing, the customer doesn’t see a large difference in my items priced between $15 and $20.  Customer opinion shifts when the price goes to $10 or less.  Now we are talking about a deal, in the spirit of Amazon’s Prime Day deals.  Now it looks like I am playing along.  Now the customer becomes interested, and often not for themselves.  When the customer sees a neat shirt at a low price, they often think of who they know who would want it.  It makes them a thoughtful gift-giver to think of others on a shopping day like Prime Day.  That makes the customer feel good about him/herself.  That is what triggers the purchase for my products.  To move quantity on Prime Day, we have to discount, and it has to be aggressive.  My Prime Day strategy isn’t to make money, it’s to liquidate inventory and gain traction on the listings that need it the most.  

In 2015 we took the aggressive, deal oriented strategy and saw sales of about $15k, easily the best non-Q4 day in our history.  Our typical day in July is $5.5k.  In 2016, we tried something different.  Regular prices, but a high spend on Sponsored Products to divert traffic to those items.  Not a good result, only $9k in revenue.  This year we did a mix.  We marked down about 30% of our inventory, the most underperforming SKUs we carry, and we also ran Sponsored Ads for our top 30% at regular-to-elevated prices.  We doubled our Sponsored Ads bid from the standard bid at the advice of our Sponsored Products coach (who works for Amazon).  Results?  $15k in revenue, a great bounce-back from last year’s number.  77% of our sales came from the marked down 30% of inventory.  That is what moved the needle.  We still had sales of our full-priced items, but few of those sales were driven by Sponsored Products.  Most of our top sellers for the day were Game of Thrones related, some at high prices, and that is thanks to the series premier being this coming weekend.

My Prime Day advice for third-party sellers is to discount, be aggressive about it, and move any inventory that is stale or needs traction.  Theses customers are looking for great deals, and when they find them they will buy for themselves and others.  They are not nearly as impressed by regular priced merchandise, but many of them will buy it.  There is no need to mark down your best sellers, but if you have anything you’d be happy to have off your books this is a chance to move it.

I hope you all had an excellent Prime Day 2017.  I’m already looking forward to Prime Day 2018!