Prime Day's Threat Lies Not in the Deals

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Prime Day's Threat Lies Not in the Deals

By Randy Hofbauer, EnsembleIQ - 07/10/2017

Amazon.com's Prime Day 2017 is upon us. The event, which takes place July 11 (though deals begin at 9 p.m. EST a day prior), is all about special savings available exclusively to Amazon Prime subscribers, offering deals on par with those that many retailers pitch on Black Friday.

It's likely to be huge for the Seattle-based ecommerce behemoth. Prime Day 2016, which took place July 12, was the biggest sales day the retailer had ever experienced up to that point, with U.S. orders rising 50-plus percent compared with the previous year's Prime Day. Additionally, some analysts estimate that Amazon may have added half a billion dollars or more in incremental sales that day.

But deals on goods, especially durables, aren't the threat here – especially for grocers (although this year's deals do include groceries). Although many of the offerings available at discounts might not be found in a typical grocery store, the invitations to – and deals offered by – the Prime program are the real cause for concern, especially considering Amazon's continued push into brick-and-mortar food retail and expected acquisition of Whole Foods Market.

Amazon is offering a free month of Prime membership for trying the program – which allows for Prime Day participation, in addition to other amenities such as free two-day shipping, video and music streaming, and more – and even will knock $20 off the $99 monthly subscription fee if users subscribe to Prime via an Alexa-powered device. Along with those amenities comes access to such delivery services as Amazon Fresh and Prime Now, both of which bring the loyalty benefits – and big threat of delivery convenience – into the grocery world.

The fact is that Prime Day is less about deals, and more about showcasing the power of Prime, said Jordan Rost, VP of consumer insights at Schaumburg, Ill.-based Nielsen.

“And fast-moving consumer goods, including food, beverage and nonfood categories like personal and household care, are an increasingly big part of that value,” he explained. “From their private label products exclusive to Prime members to increasing availability of same-day delivery on fresh foods, it's clear that grocery is, and will continue to be, a big focus.”

Though it doesn't share information on its Prime members, Amazon was estimated to have 80 million members as of March, up 6 million from last December and 22 million from the same time a year prior, Business Insider reported. Prime Day 2017 will only add to that number by creating more potential converts to its grocery services.

Delivering on a Prime Promise

It's already understood that Amazon is more than a retailer, it's also a services and platforms company – and that the real power of collaboration between Amazon and Whole Foods will be in scaling the Austin, Texas-based natural grocer. Amazon will help make Whole Foods more available, accessible and, in the future, automated. For at least a few trial stores, we might expect to see Amazon adopt the model for its brick-and-mortar bookstores to its grocery stores, or to Whole Foods stores, Rost said. We might see such things as hyperlocal inventory informed by what's selling online, dynamic pricing, and even digital content such as reviews overlaid on physical retail.

But arguably just as concerning is the appeal of belonging to – and taking advantage of – such an exclusive club as Prime moving from online to physical stores. It can be assumed that as Amazon gets further into the brick-and-mortar game, Prime amenities and exclusives will also have a place there, offering a bonus for shopping its physical stores, as it already offers members online. When that occurs, supermarkets have extra reason to be afraid.

Therefore, it's critical for grocers to keep reminding themselves that consumers are rewarding those of you that provide an experience that delivers on your promise, and doing so with their loyalty.

According to Rost: “Retailers should always ask themselves this question at every strategic touchpoint: 'How are we building and sustaining relationships with our customers, not from transaction to transaction, but interaction to interaction?' Memorable engagement that provides value to the customer – and more than just a competitive price – will be key."

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