Strategy Prime Day unlocks huge value for Amazon (AMZN)

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Amazon’s annual Prime Day promotion resulted in the biggest day of sales in the online retailer's history

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(BI Intelligence)
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Amazon’s annual Prime Day promotion resulted in the biggest day of sales in the online retailer's history, it announced in a press release.

While Amazon has not released specific numbers, the company said sales from the 30-hour promotion improved significantly from last year’s event.

Prime Day created immense sales for both Amazon and its merchants:

  • Amazon saw 60% sales growth from Prime Day 2016, as well as a 50% increase in the number of Prime subscribers making a purchase. The company also said more consumers signed up for the program on Prime Day 2017 than on any previous day, adding to its existing subscriber base, which is estimated to be around 85 million in the US.
  • Third-party sellers sold 50% more items on Amazon’s marketplace by noon (GMT) on Prime Day than in the same period last year. The company also stated its merchants saw greater sales growth than Amazon’s 60%.

The promotion helped Amazon connect with consumers via the Echo line and Amazon app:

  • Amazon sold seven times more Echo products than on Prime Day 2016. This is partially due to the steep discounts Amazon offered on the devices, which were likely enacted to introduce its Alexa voice assistant into more households.
  • The number of orders made through the Amazon app more than doubled from last year's Prime Day. This likely includes a significant increase in app downloads during the promotion.

Amazon is using Prime Day to create a cycle of ever-increasing engagement and spend, as it gets more people to own Echos, subscribe to Amazon Prime, and download the Amazon app. According to a report from The NPD Group, 30% of people who purchase an Echo Dot buy another one in the next year, and their orders through Prime Now increase 140%.

Additionally, half of the money Echo users spend online is spent through Amazon. Meanwhile, Prime subscribers tend to spend more on Amazon than non-subscribers, and once consumers have the app downloaded, it is easier to go back to it. All of these channels and products could lead to increased future revenue — a Harvard Business Review survey found that consumers who engage with a retailer through multiple channels spend 10% more than ones who only shop through one channel. While Prime Day saw tremendous sales this year, the real value is in finding more ways to engage with customers.

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