Was Amazon’s Prime Day Really a #PrimeDayFail?
If you have access to the Internet (which you obviously do because you’re reading this) you know that a new holiday, Amazon Prime Day, has come and gone. Some say it’s much ado about nothing, others disagree.
The whole idea was that Amazon created a sale around its 20th anniversary which included discounts on its millions of products that started at about $.02 (yes, two cents) and went upwards of $100 (I’ll get to that in a sec). Some shoppers got incredible deals, others spent the day in frustration on a waiting list to no avail.
Image source New York Times
On that fateful day, I read a New York Times article that outlined consumer sales fatigue, between sales, coupons, loyalty programs and more. It really begs the question: What’s the point of Prime Day, a made-up holiday, as an excuse for a sale?
Maybe it was a publicity move. But if that were true, it backfired immensely. A lot of upset shoppers were empty-handed and didn’t hesitate to tweet about it –just search #PrimeDayFail or check out this article and this Buzzfeed. A lot of people were even driven to competitors like Walmart, which matched Amazon’s prices for the day. Not so great for business. So what was the real reason?
If you ask me, it was all about inventory. Amazon sells hundreds of millions of products. This is great for us, because it means that whenever we think of something we want, we can find it and buy it. But all that inventory has to come from somewhere. Amazon has to store it, probably in no small number of large distribution centers or warehouses, and that is not cheap to do. And if Amazon has been in business for 20 years selling millions of products, those centers must be pretty full.
Full disclosure, I have no knowledge of Amazon’s financial/logistical structure; this is just educated speculation from what I’ve learned in business school.
So let’s say it’s 2007, and BluRays are replacing DVDs. To keep up with demand, Amazon would have increased their supply of BluRays, even for movies from years before. I don’t even want to venture a guess as to how many BluRays were in those warehouses. Fast-forward to 2015: now the trend is watching movies and shows on streaming sites and services. The demand for BluRays has gone out the window, and even though that huge supply of BlueRays hasn’t sold, it’s probably still in storage.
A specific example I’ll call to mind is a Box Set extended edition of the “Lord of the Rings” trilogy. Amazon sold 35,000 of these box sets. I never would have guessed that many existed, but that’s how much of that product they had available to them, and they SOLD OUT. That’s a lot of newly freed up space in those warehouses.
BluRay is just one example of all the different types of inventory I’m sure Amazon had sitting around collecting dust and inventory holding costs. That’s why people saw tiny sales as small as two cents on popular products, yet the seemingly useless and outdated items were discounted at almost 80% like that LOTR BluRay box set. Amazon had to get rid of it all to make room for new products, and selling them on sale is a good way to make space without losing all of their margins. The “20th anniversary” excuse was either lucky timing, or something they had been waiting for. It’s basically an Amazon garage sale disguised as an anniversary sale.
So if that was Amazon’s goal, Prime Day wasn’t really a fail at all. Amazon won. Anyway, at least that’s my guess.
Posted by Val