Delayed Amazon Prime Day Opens Door to Competition

The coronavirus pandemic has delayed a lot of events this year, so it's no surprise that Amazon (NASDAQ: AMZN) decided to delay its Prime Day event, which usually takes place during the summer. This year, Prime Day is October 13 and October 14. This delay likely won’t hurt Amazon. In fact, it could easily help boost Amazon’s sales while also kick-starting a busy holiday season for the company.

Despite the COVID-19 pandemic, Amazon has been able to come out on top. Earlier this year, the company’s CEO Jeff Bezos warned its investors that they should prepare for potential losses (to the tune of around $1.5 billion) in the second quarter of the year since the company was planning to spend $4 billion on COVID-19-related expenses. However, that wasn’t the case at all. Amazon doubled its year-over-year net profit to $5.2 billion compared to the $2.6 billion it earned in the second quarter of 2019. Last year, Amazon had 124 million U.S. Prime users, and this year, that number is supposed to increase to more than 142 million — that’s more than 50% of the U.S. population. This year, despite all odds, the company can brag about its profits and how it’s been able to create 175,000 new jobs and grow its customer base. This has been unusual as a lot of industries and companies have experienced the opposite, with store closings and layoffs.

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Last year’s Amazon Prime Day earned about $6.93 billion worldwide and it's projected to earn $9.91 billion this year.

This year’s Amazon Prime Day will be happening a little more than a month before the infamous Black Friday shopping weekend, which is usually the beginning of the holiday retail season. These two major shopping events offer deals and sales to get customers to spend their money ahead of the holiday season, which offers even more deals and sales. This is the part of the year that many consumers and retailers look forward to.

Andrew Lipsman, the principal analyst of eMarketer, said, “Prime Day is a coordinated industry-wide event with other retailers planning promotions to compete with Amazon for shoppers’ attention.”

There aren't many companies that will be able to earn as much as Amazon during its Prime Day event, but they are making an effort to at least get the attention of customers and persuade them to buy their deals instead. Since this year's Prime Day is in October, other retailers have scheduled their own sale events for this month, so they can attempt to compete with Amazon. I say “attempt to” because Amazon is massive. Chris Dessi, vice president of Productsup Americas and Australia division, said:

“With Amazon Prime Day occurring in October rather than July, consumers will certainly take advantage of the deals and two-day shipping to cross items off their holiday shopping list… Smart and savvy marketers can be very successful by making sure the brand shakes hands with the consumer early in the shopping season, engaging them in some way by bringing them to their site or using ads to later reach out to them.”

Wayfair (NYSE: W) is one company that’s trying to ramp up its own sales this month by offering substantial discounts and savings on appliances, heaters, air purifiers, furniture, and kitchen goods. It appears that it wants to compete with Amazon by offering deals that are greater or equal to the ones that a Prime user would see on Prime Day. People have been self-isolating at home which has resulted in a lot of people doing a lot of online shopping, and Wayfair has benefited from the increase in online traffic.

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While other e-commerce sites could see an increase in sales during this month and into the holiday season, it won’t be anywhere near what Amazon is expected to bring in. Telsey Advisory Group forecasts Prime Day sales of up to $11 billion for Amazon — a 40% increase from last year’s Prime Day. Amazon could have a strong fourth quarter and end the year on a very high note. Having the holiday shopping season spread out over three months will also benefit the company: It won't be flooded with orders and have its logistics network overwhelmed, resulting in shipping delays and unhappy customers.

Mark Mahaney, an analyst at RBC Capital Markets, said, “I think Prime Day this year may allow Amazon to better manage what will likely be a very robust online retail demand this holiday season.” A report last month from research firm Forrester predicts that online retail sales are expected to grow 18.5% this holiday, the highest growth since 2008. Again, with people staying home and doing most of their holiday shopping online, we're going to see a boost in online retail sales — especially with most brick-and-mortar retailers operating at limited capacity and perhaps even canceling Black Friday events to avoid unnecessary crowds. Pandemic or no pandemic, people will be on the lookout for the best holiday deals around, and Amazon has always been able to fulfill that demand.

Until next time,

Monica Savaglia

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