Prime Day isn’t just an event for Amazon, as many other retailers activate around it. For example, Target Circle Week, Walmart+ Week, Kohl’s WOW Deals, and Macy's Black Friday in July all took place last month around Amazon's Prime Day. While most of this competition is grounded around these brands’ webstores, the physical store is also a key marketing, activation, and servicing asset. As such, we've examined how these brands visitation trends changed during Amazon's Prime Days (July 11-12, 2023) versus the prior six days’ trend and all of June. As shown in the table below, it appears that their efforts didn’t favorably impact traffic (i.e., the top of the sales funnel). We would expect that the deals and in-store messaging produced a lift to conversion rates, and as such, the transaction trends will show better. This is especially true for Target as app downloads and users both meaningfully increased year-over-year according to SensorTower.
As it relates to Amazon’s revenue lift from Prime Day, we see a strong and more focused lift in fulfillment center activity compared to prior years in the figure below. We show night shifts here because they are the more dynamic series to near-term changes in demand for Amazon’s retail goods; day shifts and delivery trucks also show a strong and more focused lift. We suspect that the more “focused” profile reveals an Amazon that is better positioned to meet and service demand than in prior years, which is what Amazon CEO Andy Jassy has said in CNBC interview when describing the fulfillment centers and delivery network as it relates to speed of delivery and 1- and 2-day delivery as a percent of deliveries. Better servicing levels and efficiencies portend well as it relates to winning consumer spend, driving healthy gross merchandise volume (GMV) growth, improving profits, and generating cash. Last year was a humbling year for the company; in contrast, this year is shaping up to be an emboldening year as Amazon’s Q2 2023 results reveal.
Analysts peg this year’s Prime Day as generating $13B in GMV--60% in the U.S.--for around a 7% increase year-over-year, as shown in the figure below from Digital Commerce 360. Amazon said that “over the course of the two-day shopping event, Prime members purchased more than 375 million items worldwide.” 375 million is pretty ubiquitous. Amazon seller services firm JungleScout performed a consumer survey ahead of this year's event, and 68% of the survey’s respondents said that they would be shopping Prime Day and that 65% had a Prime account, up from 56% last year. Adobe said that the sales were driven by appliances (+45%), housekeeping supplies (+28%), and electronics (+18%). Numerator pegs the average order value in the U.S. at $54.05.
Source: Digital Commerce 360
For Q2 2023, Amazon’s U.S. first-party sales (products being sold directly by Amazon) grew +4% year-over-year and third-party GMV grew +18%. Third-party growth came from both more sellers and higher sales per seller. Placer’s activity measurement of Amazon FCs shows that the Q2 ended strong and that momentum built throughout July. Revenue guidance for Q3 relative to the Q2 base was slightly more robust than last year. We see that both in the signal for regular employees and the snap back in night workers. On the earnings call, CFO Brian Olsavsky said, “During the quarter, we also saw improvements in macroeconomic indicators across our North America and international segments but continue to see customers trading down and seeking value in their purchases.”
Speed of delivery on a vast selection (third-party enabled) is one of the primary drivers for Amazon’s accelerated growth; its earnings release read, “Amazon delivered its largest selection of products to U.S. Prime members at the fastest speeds ever in the quarter. The company now offers U.S. Prime members free Same-Day or One-Day Delivery on tens of millions of the most popular items. Across the top 60 largest U.S. metro areas, more than half of Prime member orders arrived the same or next day in the quarter. So far this year, Amazon has delivered more than 1.8 billion units to U.S. Prime members the same or next day—nearly four times the number of units delivered at those speeds by this point in 2019”. Amazon intends to double the number of same-day fulfillment centers and to expand in consumables. On its Q2 2023 update, Jassy noted, “Customers care a lot about faster delivery. We have a lot of data that shows when we make faster delivery promises on a detail page, customers purchase more often, not just a little higher, meaningfully higher. It's also true that when customers know they can get their items really quickly, it changes their consideration of using us for future purchases.” Another focus for driving second-half growth is more deals, deals, and deals as was the case during Q2 and with Prime Day. Jassy continued, “We offered customers 144% more deals and coupons than we did in Q2 2022. Prime Day was similar.” Despite more deals and increased service level investments, profits Amazon expects to grow revenue by +$6B year-over-year ($24B annualized) for Q3.
Jassy also said, “We're encouraged by the progress we're making on several key priorities, namely: lowering our cost to serve in our stores business; continuing to innovate on and improve our various customer experiences; and building new customer experiences that can meaningfully change what's possible for customers in our business long term. The results showed good progress on the first two. For example, “a 19% reduction in miles traveled to deliver packages to customers and more than a 1,000-basis point increase in deliveries fulfilled within region, which is now at 76%.” On its stores business, Jassy shared the areas of focus--grocery and healthcare--and how they are thinking about the two. On grocery, Jassy said, “If you want to be able to serve more customers, which we do, and there are a whole number of reasons for that and customers want it, you have to have a strong physical presence...if you want to be really broad, you have to have a mass physical format. We have been working on that for several years with Amazon Fresh. And I would say that we weren't pleased with the inputs, the progress on the inputs there. And the team has worked very hard over the last year to first start on the quality of the input, and that goes towards the quality of what we already had in place. And these are things like the right in-stock levels, the right cost structure, the right figures on things like obsolescence, just a number of the core inputs there, we just felt like we could be sharper and better. And I think that team has made up a lot of improvements.”