Amazon Prime Day: the biggest loss leader in history?

This year’s record-breaking Amazon Prime Day results were up 60 per cent and could top $3.5 billion; but with discounts of 45 per cent or more, Amazon will lose significant sums against its regular prices. E-commerce delivery expert David Jinks at ParcelHero says Prime Day could cost Amazon $700 million, but is still the biggest sales hook of 2017.

Amazon has announced 2017’s Prime Day has outsold Black Friday and Cyber Monday to become its biggest ever sales day, with sales up 60 per cent on last year. But with aggressive discounts of 45 per cent and more on items from TVs to tablets, can Amazon afford its big day, and what does it stand to gain?

According to e-commerce fulfilment firm, ParcelHero’s head of consumer research, David Jinks, Amazon can swallow the steep discounts on many items because they are bait for shoppers to join its highly lucrative Prime service. “If the Prime Day sales averaged a 20 per cent discount on every item, and sales do reach $3.5 billion, this would mean potential loss of $700 million for Amazon against its standard prices.”

“That’s a big pill to swallow. But it’s worth it for Amazon in the long run. Prime members who stump up £79 to join its Prime service spend an average double the amount as non-members do with the e-commerce giant. Members spend an average $1,300 with Amazon; and it could well be that Prime Day helped reel them in.”

Amazon believes its UK membership can grow significantly. There were approximately 8 million Amazon Prime subscribers in the country as of March 2017—33 per cent of UK households. In the US it has reached 47 per cent of households.

“Even if the average discount was 20 per cent, that $700 million hit is nothing against the £8 billion ($10.4 billion) UK households alone will spend with Amazon during the course of a year! And no doubt Amazon will have shared some of the discounts’ impacts with its suppliers!”

https://staging.growthbusiness.co.uk/amazon-prime-day-smes-retailers-need-know-2551485/

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

Related Topics

Amazon