News at Smith

Why Amazon’s Rivals Love Prime Day

Jul 12, 2017
World Class Faculty & Research


SMITH BRAIN TRUST – Amazon's Prime Day summer sale, now in its third year, is becoming something the e-commerce giant might not have intended. It's becoming a big day for its rivals.

The midsummer hype about deals online is having an impact beyond Amazon's seemingly endless website, says P.K. Kannan, professor of marketing at the University of Maryland's Robert H. Smith School of Business.

"If the other retailers have a significant presence online, then they can expect what we call 'spillover traffic,'" Kannan tells Digital Commerce 360. "This is similar to the traffic that is created in a mall by a huge sales [event] at Macy's, for example. Other stores nearby might benefit from the traffic in the malls."

Amazon's Prime Day sale launched in 2015, amid a push to drive up numbers in its $99-a-year membership. The e-commerce giant prizes prime members, who get free shipping on more items, plus free music and video streaming, but who also spend more on the platform – $1,300 per year by some estimates, compared to $700 among non-Prime members.

Last year, 23 of the 50 largest non-Amazon retailers in the U.S. held online sales events on Prime Day, including Walmart, Dell, Macy's, Best Buy and Kohl's, according to Digital Commerce 360. They didn't call it "Prime Day," of course. In fact, they didn't mention Amazon at all.

The sale at Macy's last year reportedly resulted in 41.1 percent more online traffic week-over-week. Walmart, meanwhile, saw a 20.7 percent increase in traffic.

As for Amazon itself, the 2016 Prime Day reportedly produced the biggest single-day revenue in the retailer's history, with an estimated $2.5 billion, up from an estimated $1.5 billion the year before, according to Internet Retailer. Amazon doesn't disclose specific sales figures for Prime Day.

Kannan says the reach of Prime Day almost forces retailers to run their own sale or risk being ignored by shoppers. "Doing nothing can be worse [than trying to compete], as some of their own consumers might start shopping at Amazon and thus you end up losing your core base and loyal shoppers," he tells Digital Commerce 360. "This is something other retailers will want to avoid."

This year's Prime Day is on July 11, with discounts beginning at 9 p.m. Eastern time on July 10.

Kannan says when thinking about how to approach the day, retailers need to consider the future rather than try to simply generate one-time sales. "The key question is whether this strategy borrows from future sales," he says. "That is, shoppers just advance their purchases and do not spend as much later. But one can also argue that customers may displace some budget allocated for summer vacations on retail goods, which may actually increase sales overall."




About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.