The summer's 'Black Friday' is just around the corner.
Need some new PC games? A few avocados from Whole Foods? How about an Echo Show? Prime Day has grown into a major sales coup for Amazon, driving more than $2.41 billion worth of purchases on Prime Day 2017, according to an estimate by Digital Commerce 360. In a press release, Amazon said that its Echo Dot device was the top-selling product on Prime Day in 2017, and that sales grew by 60% over Prime Day 2016.
But Prime Day is a whole lot more than a sales bonanza. It's a strategic push to make Prime a feature of every home, as well as a 'training day' for newer channels such as Twitch, Whole Foods, or Amazon's growing family of Echo voice assistants.
"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. And I think it's increasingly becoming a question of: 'How do we incorporate every retail app we have into the Prime Day story?'"
This year, Amazon is pushing promotions that include Amazon credits for customers who shop at Whole Foods, free games through Twitch for Prime subscribers, in addition to a vast array of sales on books, movies, electronics and other goods. (Amazon bought Whole Foods and Twitch in 2017 and 2014, respectively.)
The lure of flash sales is also a significant driver of Prime memberships: Amazon said in a press release that more new members joined Prime on July 11, 2017 than any other day in the company's history. Prime members also spend significantly more on average, added Mike Levin of Consumer Intelligence Research Partners (CIRP). "Amazon Prime membership encourages much more frequent shopping, likely because the free shipping benefit knocks down a key barrier to buying online often and makes Amazon their first stop for online purchases," Levin explained.
More than two-thirds of Amazon customers are Prime members according to CIRP data -- and if Amazon CEO Jeff Bezos gets his way, that number will reach 100% soon enough.
"Our goal with Amazon Prime, make no mistake, is to make sure that if you are not a Prime member, you are being irresponsible," Bezos said at an annual shareholder meeting in May 2016.
That's well within reach -- even with price hikes on membership, according to Forte. Amazon recently raised its standard annual fee for Prime from $99 to $119 per year.
"They've got multiple flavors of Prime memberships -- student memberships, a low-income option -- so long as they continue to tier the pricing, I don't think price hikes will slow the growth," Forte added.
It's no coincidence that Amazon promotes their family of Echo devices on Prime Day, either. Voice assistants are yet another way to shop, and Echo owners are increasingly taking advantage: They spend 66% more than average Amazon users, according to CIRP. They even outspend regular Prime members, spending $1,700 per year on average as opposed to $1,300 by Prime members who don't own an Echo.
"We've long thought that Amazon is keenly focused on building increasingly loyal and frequent shopping customers, and Echo seems to promote that goal," said Josh Lowitz of CIRP.
So what do price hikes, continued membership growth and billions in Prime Day sales add up to for Amazon?
At a market cap of about $877 billion as of Friday, Monday's windfall alone may not be enough to push Amazon past the trillion-dollar mark. As Prime memberships grow, subscription fees alone could add $18 billion to Amazon's top line by 2020, by one estimate from analytics site Trefis. But its true strategic potential for Amazon may be yet to be realized.
"Prime Day really highlights the strategic importance of Prime for Amazon, as well as their real competitive advantage: their ability to get to so many products to so many customers, so quickly," Forte added.