Treat Yo’ Self

To all the recovering shopaholics, you may want to stay off the internet on Oct. 13 and 14th. Prime Day, the “exclusive” yearly sale for 150m Amazon Prime members, has been confirmed for October 13 and 14th (delayed from July). Investors, keep your eyes peeled. This sale could signal how consumer demand will look like for the upcoming holiday season.

Confessions of an Amazon shopaholic

Prime Day, which is only available to Prime members who pay a $119 yearly subscription, converts more shoppers into Amazon Prime members than any other day in the year. On top of getting its paying users to buy even more, Prime Day is used to upsell its ecosystem of Amazon-owned businesses (e.g. Kindle, Audible, Whole Foods).

In 2019, over 200 other large retailers (e.g. Walmart, Target, Best Buy) offered big discounts on Prime Day which boosted their sales by 68%. However, 2020 may look very different for these retailers, who will be unprepared to set up competitive sales due to COVID’s impact on their supply chain. None of these retailers have announced discounts yet, but expect the competition to heat up. Two of Amazon’s largest competitors won’t want to miss the Prime Day action:

• Walmart ($WMT) launched Walmart+, an Amazon Prime-like service, to compete against Amazon on Sept. 1, 2020.
• eBay ($EBAY) aggressively set up their past campaigns to compete directly against Amazon… Even going as far as naming their 2019 sale “Crash Sale”, to mock Amazon’s site going down on 2018’s Prime Day.

Gauging the success of Prime Day

The pandemic has driven a two-sided recovery with higher-income households recovering faster and lower-income households struggling. Prime Day will be an important gauge in testing consumer demand before the holidays and sales go either way:

• The bull case… With the world on lockdown, Amazon will have even more shoppers on its platform for Prime Day, many of which could convert into Amazon Prime subscribers. A need for discounts could increase demand for Prime Day products.
• The bear case… The company has operated at record capacities throughout 2020 and investors may not see as big of a boost from previous Prime Days. Inventory and supply chain issues could also affect sales. A struggling economy could decrease consumer demand.

For investors… Amazon releases its next earnings report on Oct. 22, 2020, but these sales will not include the impact of the upcoming Prime Day, Black Friday or Cyber Monday. The impact of these sales will be reflected in the following report to be released Jan. 2021. Despite falling over 10% in September, Amazon’s stock is still up over 66% in 2020. With a busy holiday period approaching and lockdowns that will most likely continue into 2021, Amazon could continue to benefit.