With Amazon going on the offensive early with the launch of an October Prime promotion, what will the impact be on retail’s crucial golden quarter trading period?
Online goliath Amazon has chucked a brick at the window of established golden quarter trading patterns with the launch of an October Prime promotion.
Amazon has typically run Prime Day during the summer but this year it is staging a Prime Early Sale, running on October 11 and 12, in a bid to grab early spend from shoppers.
Black Friday’s adoption in the UK over recent years has already shifted the shape of the seasonal splash-out, and the original day-long extravaganza has lengthened as the promotion took off.
So what might the impact be of Amazon’s Prime Early Sale, which is taking place as consumers stagger under the weight of a cost-of-living burden that few have ever experienced?
Amazon has two primary objectives: as well as scooping up consumers’ cash in double-quick time, it aims to promote membership to its Prime subscription scheme.
The etailer has explicitly flagged both. Pointing out that the event is six weeks earlier than Black Friday, UK boss John Boumphrey said in September, as details were released: “You may not be ready for panto and mince pies but with fewer than 90 days until Christmas, it’s not too early to start planning your shopping for the festive season ahead. This exclusive 48-hour sales event will help people save money and shop smarter as we head into the festive season.”
“The early Sale is clearly an attempt to bolster Amazon’s revenue following a sales slowdown in the first half of the year”
Lisa Byfield-Green, Retail Week research director
The early Sale is only for Prime members and Amazon highlighted the availability of a free 30-day trial of the membership programme for those yet to sign on the dotted line.
The hope is that once hooked, they will remain. Prime members – that is about half of UK households, according to Kantar – typically buy more often than other customers, locking in spend.
As retail comes under pressure in tough trading conditions, having more Prime participants is of obvious value. The event comes in the aftermath of Amazon raising the price of Prime membership by £1 to £8.99 for monthly subscribers, or from £79 to £95 for an annual subscription.
The increase was blamed on higher inflation and operating costs as Amazon, like other businesses, faced tough conditions. In its most recently reported quarter, to June 30, Amazon reported a 4% fall in sales at its online stores and an overall net loss.
Chief executive Andy Jassy said Amazon was “seeing revenue accelerate as we continue to make Prime even better for members” as a result of benefits including speedier shipping, free delivery from other services such as Grubhub and the new Lord of the Rings series.
While many products on offer this week are Amazon’s own such as Fire tablets and its Basics home range, there are also items from brands such as Lego, Nespresso and Philips.
Feeling the pinch
RAH Advisory founder and seasoned industry analyst Richard Hyman says: “Amazon is clearly feeling the pinch, as it is every other retailer. In the past, it has had Black Friday followed by Christmas to look forward to as peaks in sales.
“While I believe the sales line at Christmas may well go up, I’m not sure it will go up for everyone and I’m not sure it will, in any case, go up by much for anyone.”
An early move may make sense, he says: “Black Friday in the UK has become progressively less significant over recent years; these days it’s just another promotion.”
Black Friday and the latest Amazon offensive unsettle traditional trading routines. Hyman adds: “Retailers will often have kicked off their Christmas promotion and in order to participate in Black Friday, they have to pause and switch away from Christmas and then switch back to Christmas. Not surprisingly this is rather confusing for consumers. Amazon is looking to grab whatever demand it can and needs to shout from the rooftops in order to gain attention. I think that’s what this is all about.”
Retail Week research director Lisa Byfield-Green observes: “The early Sale is clearly an attempt to bolster Amazon’s revenue following a sales slowdown in the first half of the year”.
She says Amazon’s revenue growth of 7% in quarters one and two was “the first time the retailer has ever grown in single digits” and followed booming sales during the pandemic.
Amazon’s promotion coincides with others. Tesco is running a toy Sale for Clubcard members, while electricals giant Currys was offering ‘Epic Deals’
She adds: “With the Prime Early Access Sale, it will be looking to get ahead of competitors to secure early Christmas spend. Discretionary spend is limited this year and consumers will be shopping early to spread spending over a longer period.”
Prime Early Sale deals such as 50% off Hasbro toys should key into seasonal demand well.
IMRG strategy and insight director Andy Mulcahy says: “Many retailers try to stay out of discounting a bit more in October as November is a heavy discounting month, plus getting a bit of volume shifted before the Black Friday order spikes kick in is an operational boon.”
Amazon’s promotion coincides with others. Tesco is running a toy Sale for Clubcard members at present, while electricals giant Currys was offering ‘Epic Deals’ during Amazon’s promotion. Very has already released its Christmas advert and a pay-later facility to spread the cost. John Lewis has removed minimum spend for click-and-collect orders until mid-October and lengthened its seasonal returns policy “because we know that customers are spreading the cost of Christmas”.
Amazon’s rock may not shatter the trading window for competitors, but it could crack it enough for weaker players that will struggle to stop the glass blowing in as the winds of recession gather and the industry’s big players manoeuvre to win the festive spend early.
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