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June 26th, 2021 (Updated 07/26/2021) | 10 min. read

Jochen Schmidt

Amazon Prime Day: Should Retailers Compete with the Giant? 

Retail behemoth Amazon does not release its sales figures for its annual discount extravaganza event, but the sales estimates alone are enough to make any fully grown retailer weep. And as many of you look over the numbers of this years’ Prime Days and plan whether to go up against the giant on their other major sales days; we’ve put together some things to consider for the next Prime Day event taking place in  

To compete or not to compete? That is the question and a painful one at that! 

There are only so many David and Goliath stories (just the one, really) and it might make more financial sense to put your head in the sand and let Amazon do its thing for a couple of days… Or should you step out into the field, pick up your sling and take aim? 

In this article, we’ll look at key things retailers should consider if thinking about taking on Amazon during its main markdown event. 

The Success of Amazon Prime Day 

Amazon held its seventh-annual Prime Day event on June 21 and June 22 this year, with a summer-focused sales spectacular during which it sold more than 250 million items worldwide. 

Prime Day has been a key event on the company’s calendar since 2015 when it was first held as a celebration of its 20th anniversary, and it does a lot to create revenue for Amazon during the slower summer period. 

Estimates by Digital Commerce 360 put Amazon’s 2021 Prime Day sales at a record-breaking $11.19 billion globally over the two-day period, up 7.6% from the last event in October 2020 when sales reached $10.39 billion. According to Adobe, sales were higher than last year’s (single-day) Cyber Monday event which, at about $10.9 billion, is the busiest digital sales day on record. 

Despite the nauseating height of these figures, sales are not Amazon’s primary objective in holding the event. The retail giant’s business model is actually to pull customers in to becoming Prime subscribers.  

Amazon Prime is a subscription service that costs $119 per year (or $12.99 per month) and comes with a 30-day free trial period. For your money, you get access to a wide range of benefits and discounts, including exclusive shopping deals, desirable delivery terms and access to multiple digital services (Amazon Prime, Music Prime, Photos, Kids+, Amazon First Reads, etc.). 

Their Prime Day event is available exclusively to Prime members, to whom they offer up a mixture of pre-notified deals and on-the-spot deals that knock the socks off the competition.  

As you might expect, the company’s own line of products (Echo smart speakers, Fire TV devices, Kindle, etc.) are featured heavily among the best discounts – it’s a great way for the company to clear its shelves of end-of-life products.  

The company promised more than one million Prime Day deals from small and medium-sized businesses this year. But while it reported the “two biggest days ever” for third-party selling on its website in October 2020 – with sales surpassing $3.5 billion – this data was not included in its 2021 figures. 

If you’re a white label business without your own website, then maybe participating in Amazon Prime makes sense because it’s your main distribution channel. 

But if not, there are a few things you might want to consider before trying to beat Amazon at its own game. 

Taking on Amazon Prime Day: Things to Consider 

Hosting Your Own Discount Days 

During big discount events like Black Friday and Amazon Prime, customer buying behavior changes. Consumers are out to get deals and woe betide anyone who gets in their way. Brand loyalty has nothing to do with anything. The customer will go where the prices are low. So even on Prime Day, they’re checking out competitor websites and comparison homepages. 

So, it makes sense that a lot of large retailers are leveraging the hype of Prime Day to kick-start their own discount days. In fact, a whopping 250 other retailers, including Walmart, Target, Kohls, Best Buy and eBay, are all finding ways to get a piece of the action, some introducing their own subscription shopping services in an attempt to snatch some market share from Prime. 

Walmart takes the retail giant on with its own four-day sale event called Deals for Days, which begins a day before and ends a day after Amazon’s Prime event and offers popular items at drastically marked-down prices.  

If you’re thinking of holding your own discount day/s at the time of Prime, remember that the reason Amazon is doing it is not for sales but subscriptions. If this is not your end game, then be sure you want to enter into a price battle with the king of price wars on their favorite days of the year. 

If adamant, you could think about holding your event for longer, like Walmart and Target, or have your entire event earlier in the year, like Wayfair, which holds its two-day Way Day event in April.  

Of course, if you need to get rid of end-of-life products, then leveraging the hype of Prime is a good idea. Customers are love-blinded by the 40% off sticker and not too concerned that there are two newer generation versions on the market because what they really want is choice. 

Play to Your Strengths 

Amazon’s key strengths are price and exposure. It is the Goliath of retailers. Formidable. Powerful. Unbeatable… 

However, something we tend to forget about customers is that they aren’t making all their purchase decisions based on price. The customer experience has actually become more important than price and product, with customers staying loyal to companies because of the experience they receive. And while it’s true that Amazon basically invented the ultimate personalized online shopping experience… there are so many other ways to add value for the customer that Amazon doesn’t/can’t do. 

David knew he couldn’t compete when it came to height, muscular strength or javelin throwing. What he had was agility, speed and a little weapon that he happened to be really, really good with. David played to his strengths and won. 

What are your strengths? What do you offer that Amazon doesn’t? A physical store where people can touch the products before buying? Experts on hand to help? Do you hold tastings? Offer pick-up-in-store services? Same-day delivery? Are all your materials locally sourced? Does a percentage of proceeds go to charity? Are eco values at the heart of your business? Do you provide life-time warranties? 24-hour support? Money-back guarantees? 

Ultimately, by being available in the market, you’re giving customers what they really want: a choice. Perhaps Prime days would be a good time to emotionalize your offering in order to compete with your strengths. 

Invest in Customer Loyalty 

As mentioned, Amazon’s big game with its Prime event is not sales but subscriptions – it’s the company’s big investment in recurring revenue, something we all covet. 

But interestingly, customers want that too. We just learned that customers stay loyal to the companies that offer them the best experience. Customers want to find a brand they love and to stand by it. 

It’s the perfect win-win. Perhaps it’s time to invest in customer loyalty.  

Reach out to your customers with personalized offers based on purchase history and customer insight in order to encourage repeat custom. Incentivize them to sign up for an account, become a member of your loyalty scheme or to apply for your premium customer card. 

We have a lot to learn from our adversaries. 

Know Why You’re Doing It 

Something we might all overlook in the heat of battle is common sense. 

Promotions should be all about return on investment. But all too often retailers don’t really know why they are running them. “Marketing said it was a good idea…”, “We do it every year…”, “Amazon is doing it…” 

So the first question you should ask yourself is: why am I going to reduce my prices? To increase sales? Boost brand awareness? Siphon customers from Amazon? Encourage subscriptions? Get rid of my end of life products? Inspire repeat custom? 

There has to be a real rationale there – financial or otherwise. If it’s going to be a financial loser, but you’re picking up customers and building loyalty, then in the long run it might be a good idea.

But you also have to consider how it will impact your brand image… Could a major sale of this kind weaken your brand health and damage your image? Premium brands should think carefully about joining the discounting madness so as not to erode their status in the market. 

Arm Yourself with Good Data 

If you’re set on orientating yourself at Amazon, you need to analyze the market, analyze the demand, and then identify which kind of actions you want to take. 

With the right tools, you can employ smart algorithms that recommend which products in your portfolio would be best to put into a promotion based on a variety of factors and variables. 

A package like Pricefx Price can enable sophisticated trend analysis through dashboards built to help you analyze promotional effectiveness and see how external data influences your internal effects. And the best thing, is that it takes care of all the data crunching for you – importing and merging everything required automatically, before turning it all into insights, which you can transform and optimize into smart pricing using the Pricefx Plan package by using the power of artificial intelligence to fine-tune all those essential pricing elements simultaneously with speed and accuracy – a truly power-up approach and Goliath won’t know what’s hit him. 

For instance, you could calculate price elasticity by watching what happens when Amazon changes its prices drastically over a certain period while you keep yours static. And you can check how this external factor affects demand. Then you can evaluate what would have happened had you adapted your prices during this time, or had you been running a promotion or a direct advertising campaign in parallel. 

Armed with this insight, you can then start getting proactive with your business decisions, leveraging market simulations to predict and recommend promotions as well as to optimize price in order to deal with a threat. 

Power to the Davids 

While you may feel completely overshadowed by the giant on Prime days, remember that your customers are glad you’re there. Because what they want more than anything is choice. And more and more, above price, that choice is being driven by the value add you bring as a retailer. 

No matter how you choose to prepare yourself for the next Prime Day event, remember to play to your strengths, know why you’re doing it, and have the data to back up your plan. 

If you’re looking for pricing technology to help you making smart promotions decisions based on real-time competitor and market data, look no further than Pricefx, and Plan, Price and Profit your way to sweet discounts that your customers will like!

No matter which strategy you decide to take, it’s important to understand that Amazon Prime Days are not the enemy but present an opportunity to optimize and rethink a strategy that plays to your strengths.