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August 2, 2018 • Volume 21


Prime Day – Is Amazon losing focus?

Amazon Prime Day has come and gone. As is Amazon’s habit, we’ve gotten bits and pieces of information that the e-commerce world tries to cobble into a cohesive understanding of Amazon’s performance. Historically, we’ve been given hints along the lines of ‘We sold enough Echo Dots to fill a million VW Beetles.’ I’m exaggerating Amazon’s level of opaqueness, but only a little.

There were three big differences this year from last year. First, Prime Day in 2018 [henceforth referred to as ‘Prime Day(s)’] was actually 36 hours long, compared with 30 hours long in 2017, which might naturally boost the growth rate. However, Amazon suffered significant site problems early in the sale [a big surprise that cloud computing competitor Google was happy to poke fun at the next day]. Second, Amazon didn’t add a significantly new Echo product this year that consumers might have been excited to buy on sale. New offerings came from the Fire TV brand, with Alexa-powered Fire Sticks.

In the US, when we compare the full 48-hours that included Prime Day(s) in 2018 (July 16-17) with the comparable days in 2017 (July 11-12) we found that Prime Day(s) was 28 percent higher this year than last (compared with 69 percent growth from 2016 to 2017, taking the day of Prime Day and the prior day from 2016 to keep things apples to apples).

The chart below tracks sales by hour for the full 48-hour period for 2017 and 2018. First, we can see that what was a one-hour spike on day one of the sale in 2017 became a prolonged 7-hour lift in 2017. We also see that day one of the sale nudged out day two in 2018. Together, these factors might explain why Amazon’s IT infrastructure may have been unprepared this year.

It is possible that Amazon.com shoppers were geared up to create a giant sales spike at the beginning of the Prime Day(s) sales, but site load issues forced them to spread demand over a prolonged period. Perhaps Amazon’s infrastructure isn’t capable of handling more than about $115 million in US orders in an hour?

From a product standpoint, the top 10 products sold on Prime Day(s) was again dominated by Amazon owned brands. Fire TV devices dominated (we’ve rolled up the Fire TV stick with Alexa voice remote and the 4K Fire TV stick here), with nearly 3 times the unit sales of the next bestselling item, the Echo Dot. The Amazon Cloud Cam security camera was a new entrant to the list from last year, holding the number 5 slot.

Four products not made by Amazon made the top 10 list this year; the Instant Pot [someone please explain the appeal of this product to me], 23 and Me’s DNA Test kit, a Toshiba 50 inch smart TV, and the iRobot Roomba vacuum. Sales were top heavy on Prime Day(s). Together, the top 10 items accounted for 9 percent of US sales volume. 

Competitively, Amazon dominated Prime Day(s), with 58 percent market share, down slightly from 61 percent in 2017. Target saw the biggest sales gain from 2017, with sales growth of nearly 300 percent, but its Prime Day(s) sales only represented 5 percent of Amazon’s sales those two days. 

All in all, Prime Day(s) 2018 was fine, but there is work to be done: The Echo line is getting a bit stale – Echos with screens (like the Show and the Spot) aren’t generating the consumer demand that Amazon would like. More importantly, though, Amazon has about four months to ensure that the site issues experienced don’t recur.

Consumers forgive the occasional site outage if it is an isolated incident, but a recurrence of the issues suffered on Prime Day(s) might signal that Amazon has lost focus on its core retail business, as it endeavors to build the world’s biggest marketplace, absorb Whole Foods, cultivate 80 private label brands, run the world’s biggest cloud computing platform, re-invent last mile product delivery, and build a world class video production studio.

Maybe there is such a thing as strategic gravity, even for Amazon?

Will Target pigeonhole Shipt?

I was recently chatting with someone who told me that Target was ending Shipt’s relationships with other retailers so that it would deliver only for Target, from Target stores. After copious research [three different Google search terms] I was unable to confirm or deny this.  

I am really hoping that this isn’t true. For Shipt to succeed economically, I suspect that the delivery volume that Target alone can generate will not be sufficient to fully and profitably utilize Shipt’s drivers. Target is a small enough retailer in the e-commerce ecosystem that I have a hard time imagining that it would be able to generate enough order density to ensure that each time a driver left the store he or she would be able to make several deliveries to customers in near proximity. I can see that it would be tempting for Target to want to hoard Shipt’s assets to itself, but without other retailers, it substantially lessens the odds that Shipt will be successful.

But my real concern is bigger than that. I saw Shipt’s acquisition not as an acquisition of a proprietary delivery service, but as a platform play for Target – it would’ve moved Target beyond being a retailer and allowed it to position itself as a retail platform. When I look at the most successful ‘retailers’ globally now -  Alibaba, Amazon and Rakuten – they aren’t retailers, they’re platforms. Alibaba and Rakuten are pure marketplace players, and the majority of Amazon’s revenue is now through its marketplace.  

I don’t know that the big winners in the future will be true retailers [those that take inventory of products that they try to sell for a markup], or if they’ll be platforms, or both. But by continuing to allow Shipt to serve multiple retailers in addition to Target, it would give Target a toehold in the platform world upon which to build. 

About Ken

Ken Cassar is vice president, principal analyst at Rakuten Intelligence, where he looks at trends in the e-commerce industry armed with Rakuten Intelligence's robust set of online sales data.

Ken brings a rich online retail background to Rakuten Intelligence. Most recently, Ken was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative digital commerce measurement and advertising effectiveness solutions. Prior to Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought leader, trusted adviser, and media source on e-commerce. His prescient outlook on fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a digital media zeitgeist at the dawn of the Internet.

Ken has an MBA and Bachelors Degree in Political Science from the University of Connecticut. Ken aspires to stay technologically ahead of his teenage children, as evidenced by his ‘Gadget Geek’ Rakuten Intelligence's profile. He also has the appropriate jacket for every occasion.