E-commerce leader Amazon.com Inc. (AMZN) is in the midst of its latest Prime Day sale, an event that may generate $5 billion of revenue, up 56% from $3.2 billion brought in during the 2018 edition, JPMorgan estimates, as reported by Barron's. Meanwhile, Internet Retailer magazine calculates that Prime Day was an even bigger success in 2018 than some reports, pulling in between $4.01 billion and $4.38 billion worldwide, The Motley Fool indicates. Amazon has not released its own figures.
Prime Day this year actually lasts for 48 hours, having started at midnight Pacific Time on July 15, 2019. This is a half-day longer than Prime Day in 2018, which went on for 36 hours. During the event, Prime members get special deals and discounts.
Significance For Investors
The optimistic Prime Day estimates come amid some investor concerns that Amazon's overall revenue growth is slowing. While the short Prime Day by itself doesn't dramatically boost annual sales, it attracts members to the company's special Amazon Prime program, which helps boost sales longterm. Attracting more Prime members is an important strategic imperative for 2 main reasons, as detailed in a previous Investopedia report: 96% of Prime members say that Amazon is their preferred online retailer, and they spend, on average 2.33 times more with Amazon each year than other customers do. Amazon's Prime program currently has about 63 million member households in the U.S. alone, according to estimates by Cowen Inc. cited by The Wall Street Journal, and the global figure is pegged at 103 million members.
- Amazon.com's big annual sales event, Prime Day, is underway.
- Prime members are Amazon's most loyal, biggest-spending customers.
- Increasing the number of Prime members is a key strategic imperative.
Key Prime Perks
The key perks associated with Prime membership are unlimited expedited shipping at no extra cost, unlimited access to Amazon's huge and growing video and music streaming library, plus various special deals and offers throughout the year, including discounts at Amazon's Whole Foods grocery stores. On July 10, Amazon streamed a special live Prime Day Concert featuring top music names headlined by superstar singer Taylor Swift, who has millions of fans around the world, both as a way to reward current Prime members and to attract more.
Prime Video already has established itself as a key competitor to Netflix Inc. (NFLX), including in the realm of original and exclusive members-only content. Indeed, access to Prime Video is a major, sometimes principal, reason for many consumers to join. Amazon Music gives Prime members access to 2 million songs at no extra charge, and for an introductory charge of 99 cents per month, they can get access to 50 million more.
While attracting loyal, repeat customers is the main reason why Amazon promotes the Prime program, it also is a significant source of stable revenue. The standard annual membership charge is $119, with students paying a discounted rate of $59, per Amazon. Members also can choose to pay on a monthly basis. Based on the standard annual fee and the estimated global membership, this may add up to around $12 billion per year.
Amazon is scheduled to report 2Q 2019 results in late July. Among the big concerns surrounding the company is that its core e-commerce sales may slow during the quarter. This year's Prime Day won't affect that figure, but any hints that emerge about its degree of success will be important factors in shaping investor confidence about Amazon going forward.