Amazon’s business is a network of services that is bolstered by its core membership offering, Amazon Prime – and with a sales day designed to reward members, the company is able both to leverage membership and reinforce the broader ecosystem, a new McKinsey report finds.
Now in its fifth year, Amazon’s Prime Day, which took place across 48 hours starting July 15, saw sales surpass the previous Black Friday and Cyber Monday combined, according to an Amazon statement. But increased sales figures aren’t the only benefit.
According to insights from the consultancy McKinsey, the benefit for Amazon is the day’s ability both to attract new Prime members – who spend twice as much as non-members, on average – and to engage existing members deeper in the ecosystem. Just witness the significant sales of Alexa-enabled devices that rope members into the voice interface.
“A whopping fourteen of the top 20 products with the biggest jumps in units sold on Prime Day(s) compared with the previous six weeks were Amazon devices, which saw increases of anywhere from 25 to 550 times,” the report states. Despite discounts of up to 50% on some devices, the platform’s gain is crucial.
Beyond that, the company’s growing presence in the advertising space was a key element of this year’s Prime Day. First, it focused on its own offer by live-streaming a Prime Day entertainment show that featured Taylor Swift – punctuated with ads for Amazon Original shows, which are available to Prime members, and new perks like Amazon Wardrobe, which allows customers to try on clothes in different sizes before buying.
The company also took the chance to emphasise its own ad products. In 2018, Amazon’s ad income rocketed to 117.2% of its 2017 total, bringing in $10.1bn. While that’s small change compared to Facebook and Google’s yearly revenues, the growth rate is far higher than either of the online ad behemoths. High-profile events like Prime Day funnel brands toward a dedicated landing page.
According to Amazon, the report continues, the benefits of advertising on the platform are impressive. “Companies that purchased sponsored ads enjoyed a 500 percent increase in ad-attributed sales during 2018’s Prime Day, and we expect that kind of boost to carry over to 2019 as well.”
But the real power of the sales day is the ability to lift all boats. In the slower summer months, major retailers such as Target, Kohls, and arch-rival Walmart saw an estimated conversion lift of between 22% and 76% compared to the six weeks prior.
Yet the benefits went broader. Many people are reminded by Prime Day of how little value they derive from membership; retailers like Walmart and Target were able to pounce by extending the sales to non-members and offered a bigger window in which to make savings.
More broadly, Amazon’s early mover advantage in the US has not always been replicated in other parts of the world, where a new breed of home-grown challengers – baby Amazons in The Economist’s words – are emerging in countries such as Brazil, where local rules and regulations have long caused headaches for American companies.
Now in its fifth year, Amazon’s Prime Day, which took place across 48 hours starting July 15, saw sales surpass the previous Black Friday and Cyber Monday combined, according to an Amazon statement. But increased sales figures aren’t the only benefit.
According to insights from the consultancy McKinsey, the benefit for Amazon is the day’s ability both to attract new Prime members – who spend twice as much as non-members, on average – and to engage existing members deeper in the ecosystem. Just witness the significant sales of Alexa-enabled devices that rope members into the voice interface.
“A whopping fourteen of the top 20 products with the biggest jumps in units sold on Prime Day(s) compared with the previous six weeks were Amazon devices, which saw increases of anywhere from 25 to 550 times,” the report states. Despite discounts of up to 50% on some devices, the platform’s gain is crucial.
Beyond that, the company’s growing presence in the advertising space was a key element of this year’s Prime Day. First, it focused on its own offer by live-streaming a Prime Day entertainment show that featured Taylor Swift – punctuated with ads for Amazon Original shows, which are available to Prime members, and new perks like Amazon Wardrobe, which allows customers to try on clothes in different sizes before buying.
The company also took the chance to emphasise its own ad products. In 2018, Amazon’s ad income rocketed to 117.2% of its 2017 total, bringing in $10.1bn. While that’s small change compared to Facebook and Google’s yearly revenues, the growth rate is far higher than either of the online ad behemoths. High-profile events like Prime Day funnel brands toward a dedicated landing page.
According to Amazon, the report continues, the benefits of advertising on the platform are impressive. “Companies that purchased sponsored ads enjoyed a 500 percent increase in ad-attributed sales during 2018’s Prime Day, and we expect that kind of boost to carry over to 2019 as well.”
But the real power of the sales day is the ability to lift all boats. In the slower summer months, major retailers such as Target, Kohls, and arch-rival Walmart saw an estimated conversion lift of between 22% and 76% compared to the six weeks prior.
Yet the benefits went broader. Many people are reminded by Prime Day of how little value they derive from membership; retailers like Walmart and Target were able to pounce by extending the sales to non-members and offered a bigger window in which to make savings.
More broadly, Amazon’s early mover advantage in the US has not always been replicated in other parts of the world, where a new breed of home-grown challengers – baby Amazons in The Economist’s words – are emerging in countries such as Brazil, where local rules and regulations have long caused headaches for American companies.
Sourced from McKinsey, The Economist; additional content by WARC staff
