Conspiracy theories surround many big headline-grabbing events: Kennedy’s assassination, the Moon landings, 9/11, and now even Amazon Prime Day. Yes, Amazon Prime Day might not have been all that it was cracked up to be. Leela Rao-Kataria, retail marketing manager at global supply chain company, GT Nexus, tells us why she thinks and it might actually all have been a bit of a ruse.
On 15 July, to mark its 20th anniversary, Amazon produced its very own holiday event: Prime Day. Though it promised better deals than Black Friday, many consumers called the event an overwhelming failure, due to quick sell-outs of coveted item and available items resembling those found at a garage sale. Interestingly, analysts argue that Amazon had ulterior motives for holding Prime Day. Most agree that in anticipation of the upcoming holiday season Amazon wanted to be ahead of the curve, and test its ability to get the right inventory levels as well as manage traffic volumes on the website itself.
Was Prime just a Test? Here are the facts:
- Testing capabilities of the website: Retailers are known to bring in 25-30% of their overall revenue from the traditional holiday season. This puts tremendous pressure on omnichannel retailers to have impeccable website presence, as in-store purchasing trends down and e-shopping goes up around chaotic holiday season. This phenomena creates excess pressure on the website capability, which must be able to handle the spike in traffic and without any user issues for the consumer, especially in the final purchasing stages. Another reason preliminary testing would be crucial is that new codes programmed in advance of the holiday season often experience unanticipated bugs or other issues that should have been tested far in advance of crucial holiday selling time. By offering Prime Day in July, many postulate that Amazon is getting ahead of the curve, by testing codes and other website features, making sure operations run smoothly and no outages occur. From a solely website performance standpoint, Amazon did deliver against the huge web volume that was generated.
- Testing inventory levels: Amazon issued a press release flaunting its amazing deals. The statement made promises of deals for popular products, however it’s a consensus that the availability of the coveted products was next to none, and users had to filter through garbage to find anything remotely usable. Many consumers complained that it felt like an online garage sale, and Amazon used this opportunity to sell out old inventory and clear warehouse space in anticipation of fall and holiday seasons. This is another great illustration of how retailers are being branded by their ability to manage their supply chains. It’s a turn-off for customers to have an expectation of products, only to find none of the products they want exist. According to a GT Nexus online survey, carried out by YouGov, 83% of UK consumers found the product they wanted to buy unavailable in-store during the past 12 months, while 70% have found the same online. In addition, retailers are challenged by excess inventory – falsely advertising great sales in exchange for unwanted merchandise which can be an easy way to lose customer loyalty.
- Brand Awareness: Most consumers wouldn’t think Amazon needed to do much branding at this point, but like any industry leader it must be seen to be constantly innovating. No other retailer has declared a national holiday, and no other retailer has operated a sale day to this level. Social media exploded, with reams of Tweets and Facebook posts messaging bombarding pages, however this had an extremely negative impact during the aftermath, with the majority of the buzz coming from disappointed shoppers.
- Sales Spikes: Jeff Bezos hasn’t been in the business of pleasing Wall Street, but after Prime, Amazon stock soared. Regardless of the poor customer feedback, Amazon still boasted a 34.4 million unit sale of product, with shoppers collectively purchasing 398 products per second. This also inflated the Prime user base, with more new members joining Prime than any single day in the company’s history. Prime also caused Amazon’s #1 competitor, Wal-Mart, to be in the reactionary seat, discounting prices up to 32% less than Amazon’s offering.
So was it all worth it? The answer is a resounding ‘Yes’. Companies have to fail in some ways to succeed. Given Amazon’s strong reputation to please customers, Amazon will continue to clean up its act and offer a better product assortment to the customer this Autumn/Winter season, focusing on an enhanced supply chain and fulfillment execution to maintain optimal inventory levels and eliminate ‘out-of-stock’ from the holiday dialog.