Amazon Prime Day has spurred retailers to start offering deals and create their own shopping events. Read more about how different companies are getting in on the action.
Outside of back to school shopping, summer is typically the slow time for retailers. Having worked nine years in retail, I can attest to the quiet stretches where you’re continually on the prowl for out of place items and things to dust.
But mid-July is slowly turning into the summer’s Black Friday, thanks to Amazon (AMZN).
The fourth Amazon Prime Day kicked off on July 16. What started as a one-day event has now been extended to 36 hours after the company tacked on another six hours this year.
Other than being longer, this year’s Prime Day was different than past ones in several ways. There were 17 countries that had access to Prime Day deals, four more than before according to the company. This was also the first Prime Day after the acquisition of Whole Foods, and Amazon made full use of its $13.7 billion purchase by tying many Prime Day promotions together with its grocery stores.
Amazon has always been mum when it comes to Prime Day sales figures. However, the company did say it was the biggest shopping event in its history, when comparing 36-hour periods for Black Friday, Cyber Monday and last year’s Prime Day. It also said that more people signed up for Prime on July 16 than any day in the past.
While Amazon is the obvious benefactor from Prime Day, other retailers have joined in, looking to capitalize on consumers in a spending mood.
Macy’s (M), Target (TGT), eBay (EBAY) and Best Buy (BBY) have all been running aggressive sales this week. Macy’s was dubbing it “Black Friday in July” and Best Buy called it the “Big Deal Day”.
Target said its one-day sale was its best online shopping day of 2018. Across the board, online sales were up at big retailers this week. According to Adobe Analytics, sales were up 54% at larger retailers on Prime Day, compared to an average Tuesday.
Other retailers have chosen to find less crowded months to host their own shopping days. Wayfair (W) launched “Way Day” this year, a one-day shopping event that took place on April 25. When it was announced, Chief Merchandising Officer Steve Oblak said Wayfair was “looking to put a new retail holiday on the map that celebrates home.”
Amazon and all of these other companies aren’t the only ones creating their own shopping events. Overseas, there’s one that’s been around longer than all of them. And it has dwarfed every other retail holiday’s sales, even Black Friday and Cyber Monday.
China’s e-commerce giant Alibaba (BABA) has piggybacked on Singles’ Day, a sort of anti-Valentine’s Day, as its shopping day extravaganza. Over the years, it has grown into the largest shopping event in the world from a sales standpoint. Chinese consumers are the main buyers during Alibaba’s Singles’ Day, although the company has steadily expanded it in Southeast Asia.
Last year, Alibaba reported $25.3 billion in sales on its platform for Singles’ Day, a 39% increase year over year. To put that in perspective compared to the U.S.’s biggest shopping days, $16.92 billion was spent online from Thanksgiving through Cyber Monday in 2017, according to Adobe Digital Insights.
Similar to how retailers in the U.S. have started offering sales and events around Prime Day, retailers in China have followed Alibaba with their own Singles’ Day shopping promotions.
JD.com (JD), the other e-commerce giant in China, announced that sales for Singles’ Day totaled $19.14 billion, more than 50% higher than the prior year. It’s important to note JD’s total is for 11 days of sales, compared to just one day for Alibaba.
You would think there’s a limit to the number of shopping holidays consumers will embrace, although it seems like everybody loves a good deal. Offering more deals to entice consumers to spend might not be as beneficial as the companies offering them hope though.
Depending on pricing and the mix of products sold, revenue might get a big boost while profit margins suffer. At the same time, online sales can carry higher costs for the company because of free shipping and free returns. Many companies are also increasingly shipping online orders from stores, which can carry higher costs than sending a package from a large distribution center.
More and more, these one-day shopping events have been turning into huge marketing events. Of course it sounds great when they highlight all the positives and don’t mention any negatives in press releases.
If you’ve been looking at investing in the retail sector, don’t let your decisions be driven by hype around shopping holidays. The reality of whether or not these days are beneficial for every company’s bottom line is likely to become apparent in their quarterly results over time.
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