Three years ago, Amazon created its own holiday called Prime Day to celebrate its 20th birthday. It happens every July and promises a day (or longer) of great deals for shoppers. Sales volume for the event is similar to, if not greater than, the busiest days of the holiday season for many retailers on Amazon, which makes it a can’t-miss opportunity. In 2017, Prime Day generated more sales volume on Amazon than Black Friday or Cyber Monday of the previous year.
How did Prime Day get to where it is today? Let’s rewind to the first Amazon Prime Day, which was held on July 15, 2015 and generated just shy of $1 billion in global revenue for Amazon. That number climbed by 69 percent in 2016 to $1.52 billion and again by 59 percent to $2.41 billion in 2017. Just two years after its inception, 8.6 percent of U.S. internet users identified Prime Day over Black Friday, Cyber Monday and other dates as the shopping day with the best deals. Perhaps the greatest indicator of Prime Day’s prominence is that it’s extended into non-Amazon related channels. Retailers take advantage of increased shopper activity to capture consumers on platforms like Google as well. Research by Merkle showed that Prime Day 2017 led to higher mobile conversion rates but smaller cart sizes, even when users were shopping on Google.
Investment in Amazon search advertising is also on the rise. Data from 2015 is not available, but U.S. search ad revenues of $1.12 billion in 2016 grew by 58 percent to $1.77 billion in 2017 and are estimated to jump to $2.89 billion in 2018. These growth numbers highlight that keen interest in Amazon is not limited to consumers but extends to advertisers as well.
Digital marketers and investors everywhere will marvel at what could be Amazon’s greatest sales day to date.
The timing of Prime Day works out well for both shoppers and sellers. July has historically been a fairly low-volume retail month for those not selling back-to-school products. A midsummer holiday offers the opportunity to capture substantial revenue outside of the October-to-December timeframe. Shoppers like the timing to snag back-to-school items. A RetailMeNot survey showed that 60 percent of U.S. parent internet users plan for at least 25 percent of their Prime Day shopping to focus around back-to-school.
With Prime Day still in its relative infancy, we expect to see solid year-over-year revenue growth again for 2018, especially with the holiday now lasting 36 hours. There have been a few minor changes to Amazon’s offerings that could impact aspects of Prime Day on a small scale. On April 1, 2018, Amazon started charging merchandising fees for Lightning Deals, which are seller-submitted special promotions. These ads, which were previously free to advertisers, will now cost $300 during the week surrounding Prime Day and $500 on Prime Day itself. While these fees are relatively small, it may mean that we’ll see more compelling offers, with advertisers thinking twice about whether their deal is strong enough to warrant the several-hundred-dollar fee. There are also more ad formats available to sellers than ever before. Last August, third-party sellers gained the ability to run Headline Search Ads, which gives them the opportunity for prime real estate above the organic and sponsored product listings.
Not surprisingly, Merkle client data shows that advertisers should expect to see increases in KPIs across the board. On Prime Day 2017, sales, spend, and CPCs were all elevated for Prime Day. Sales leading up to Prime Week were modest, with shoppers likely holding out for deals.
So, how do you get ready for Prime Day?
There are several key areas advertisers should focus on now to prepare for Prime Day. If you plan to advertise on products for the first time or make significant changes to ad copy or product mix on Headline Search, make those updates as soon as possible. Past performance helps Amazon determine what products or ads to serve on a given query. These changes ideally would have been made at least two weeks in advance, but getting any history established is better than none. Another immediate area of focus is budgeting. With several days of July already behind us, it is critical to allocate the rest of your budget smartly to be able to support the increased traffic, CPCs and revenue that will occur on and around Prime Day. If using past years’ data to inform budgeting decisions for this year, remember that Prime Day will last 36 hours, which is six hours longer than last year.