Amazon Prime Day is Rolling, But Site Outage Could Dent Sales

The first two hours of Amazon's 36-hour Prime Day event were a bit of a fail. 

Immediately after kicking off at 3 PM EDT on Monday, many eager shoppers found themselves unable to use the Prime Day site, stuck in a frustrating loop of bad links and error pages.

Two hours later, Amazon (AMZN) posted a statement acknowledging that "some customers are having difficulty shopping, and we're working to resolve this issue quickly...There are hundreds of thousands of deals to come and more than 34 hours to shop Prime Day."

Amazon's Prime Day event was expected to be huge this year, with Coresight Research projecting $3.4 billion in sales, a significant jump over an estimated $2.41 billion in sales last year. It's both a sales windfall and a strategic push for Amazon, designed to drive Prime subscriptions and promote newer sales channels like Whole Foods and Twitch.

And once the site issue resolved on Monday, Amazon shoppers could browse the usual thousands of deals, including steep discounts on Amazon products like Kindles, Echo devices, a FireTV cube and cookware from Amazon's AmazonBasics line.

In the statement on Monday, Amazon said that despite the outage for many shoppers, "in the first hour of Prime Day in the U.S., customers have ordered more items compared to the first hour last year."

It's unclear what that means in concrete terms. But it's likely that some transactions went up in smoke given the limited-time nature of Amazon's rolling Prime Day discounts.

"There is no doubt that this will erode sales and deter some customers from buying," Neil Saunders, managing director of research firm GlobalData Retail, told the Washington Post. "The outage is especially problematic as many of Amazon's Prime deals are promoted for a set window of time -- something that could cause a great deal of frustration for potential customers."

Amazon's Prime Day stumble could be a modest win for other retailers. Brick-and-mortar retailers like Macy's  (M) , Nordstrom (JWN) , Best Buy  (BBY) , Walmart (WMT) and Target (TGT) are pushing their own Prime-inspired 'Black Friday in July' deals.

Retailers offering July deals also see a spike in sales around Prime Day, according to a report from Adobe Digital Insights (ADBE) . Other retailers with more than $1 billion in revenue get a 34.9% sales lift around Prime Day, and niche retailers with revenues of less than $5 million get a 17% boost. (Mid-sized retailers don't see gains and are the most endangered by the pressure to serve discounts, according to a recent report from Moody's.)

"We expect strong online sales to continue throughout the year with a record back-to-school season surpassing $50B in online sales for the first time, driving over 16.1% year-over-year growth in Q3 2018 and a substantial increase in online shopping YoY for the holidays," said Taylor Schreiner of Adobe Digital Insights.

As the back-to-school season and the holidays loom, Prime Day 2018 will undoubtedly be a learning experience for the normally disciplined Amazon.

"Prime Day serves multiple purposes, and one of them is from a logistical standpoint," said Tom Forte of D.A. Davidson & Co. "It's a dress rehearsal for the holidays as well."

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