Amazon Prime Day in October could mean an earlier start for holiday shopping. Here’s what it means for retailers

From the thick file of “how the pandemic impacted business,” in late July Amazon announced its decision to postpone Amazon Prime Day, its annual summer sales event for Prime members, for a date that was not determined at the time. Then late last month the e-commerce giant confirmed all systems go for Oct. 13 and 14.

That’s next week, folks. And if prior years are any indication, the event promises to generate massive sales for Amazon – as well as for competing retailers – and mark the unofficial beginning of the holiday shopping season.

“As we’ve seen in past years, Amazon Prime Day has turned into a big day for retail overall, as large retailers and even smaller merchants plan promotions and deals around Prime Day,” says Michael Klein, global director of strategy and marketing for retail, travel, and consumer goods at Adobe. “They want to take advantage of the eyeballs that are going to be out there looking for deals, and we expect the same to be true this year.”

According to Amazon, the company delayed Prime Day in the U.S. to revamp its logistics operations for an expected surge in online orders and for the development of safety protocols to keep its warehouse workers safe. With millions of customers stuck at home during the pandemic, the e-commerce giant already had seen a significant jump in orders that tested the limits of its supply chain.

“This could be the biggest Prime Day we have seen,” says Sonia Lapinsky, managing director at consulting firm AlixPartners. “Working from home means people can shop without having to hide behavior from bosses or in open cubicles. Parents are desperate for new toys, games, electronics, and books to entertain their kids and are thinking about holiday gifts early.”

Klein agrees.

“People are thinking now about how it can take longer for a shipment, when before the COVID-19 crisis it could take less time, and this, coupled with the deals that are going to be available, may cause many to starting holiday shopping early.”

While Amazon doesn’t disclose revenue figures for Prime Day, Internet Retailer estimates its 2019 sales jumped 71% to $7.16 billion worldwide year over year.

Online revenue overall is expected to increase even more this year amid major changes in shopping behavior, with many consumers limiting their trips to malls and stores. According to Adobe’s Digital Economy Index <u>(ADI),</u> the pandemic has resulted in an extra spending of $94 billion since lockdowns went into effect in March. All told, online spending reached $434.5 billion from January through July 2020, per ADI, and at current growth, could exceed 2019 levels.

The Prime Day halo effect

With Amazon’s ability to bring out online shoppers in droves, retailers need to be preparing their own sales events to grab a piece of the online shopping pie.

Last year, major retailers — those with at least $1 billion in sales — saw an average lift in revenue of 68% during the two-day event, according to Adobe research. Small and midsize retailers also saw a significant increase in online sales of 28%.

That halo effect has been evident in other ways. In 2018, 37% of online shoppers said they looked at other online retail sites on Prime Day, according to a survey by Internet Retailer and Toluna, and 51% of shoppers who browsed a non-Amazon website or app during Prime Day bought something.

“Consumers are searching through Prime deals, and before they pull the trigger they are apt to make sure they can’t get a better deal on that item someplace else,” AlixPartners’ Lapinsky says. “There’s also the fishing analogy – there are way more fish in the pond on Prime Day, so other retailers who toss in a line are more likely to pull up something.”

To be sure, Walmart and Target have announced plans to host their own online sales events that coincide with Amazon’s annual shopping fest. Walmart will host the “Big Save” online event from October 11 to 15, during which it will offer Black Friday-like savings on thousands of items, including electronics, toys, and beauty items.

Meanwhile, Target’s Deal Days event will take place Oct. 13 to 14, featuring deals on hundreds of thousands of items – more than double last year. In addition, the retailer will make most deals available through its contactless drive-up and order pickup services, and for same-day delivery through its Shipt unit. Also among Target’s plans is to offer Black Friday pricing throughout November.

A 2020 Prime Day competitive strategy

Not having an exact date for Prime Day didn’t stop smart retailers from figuring out their own game plan.

“Retailers that planned ahead and have the most coveted items in stock can market them to loyal customers,” Lapinsky says. “Stocking out of key items is likely to be a big issue for Amazon on Prime Day.”

With consumers spending more time at home, they’re more likely to see more online promotions from retailers.

“Retailers are reacting to this consumer shift and starting promotions earlier,” Lapinsky says. “Prime Day will further accelerate this pull-up of holiday season, promotions, and spending.”

Hannah Andersson, the Portland, Ore.-based seller of children’s clothing, got an early start on its holiday promotions – about a month ahead of when it would traditionally begin, says Kristin Smith, senior vice president of digital at Hanna Andersson.

“Holiday for us started on Sept. 28, with more overt holiday messaging starting Oct. 5,” she says. “We’re kicking off the holiday with a promotion on our classic prints, so we’re trying to pull forward sales as much as possible.”

Hanna Andersson moved its “friends and family” event to October this year, too.

“It happens to correspond to the same week as Prime Day, so we got lucky,” she says.

What other advantages do retailers have at their avail? One is the opportunity to offer “more flexible return policies of 60 to 90 days, versus Amazon’s standard 30 days,” Lapinsky points out. “If retailers could change their policies now, they would be in a good position to compete. Retailers should also be communicating this flexibility with any Prime Day adjacent promotions.”

Retailers with physical locations can offer near-instant gratification through buy online, pick up in-store (BOPIS) or curbside service.

“Given the pressure on ‘last-mile’ delivery, consumers may not want to wait two days for delivery or risk that items do not show up in one- to two-day windows,” Lapinsky says. “If retailers can entice customers into stores and then increase basket size or at least maintain loyalty, this will be an asset.”