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The Impact of Amazon Prime Day on the E-Commerce Retail Industry.

Since its inception in 2015, Amazon Prime Day has evolved into a major e-commerce retail event, comparable to Black Friday and Cyber Monday. This annual event, originally created to celebrate Amazon’s 20th anniversary, is a two-day period in which Amazon showcases special promotions and discounts aimed at members of its subscription service. According to estimates from Digital Commerce 360, the July 2023 sale brought in over $12.90 billion globally, compared to less than $1 billion when Prime Day first began.

The continued success of the event has had profound effects on the retail landscape, influencing consumer behavior, driving sales, and shaping competitive strategies. With the upcoming Amazon Prime Day announced for July 16th and 17th 2024, this article delves into the multifaceted impact this event has on the entire e-commerce retail industry, and how your brand can prepare by partnering with the right 3PL provider.

1. Shaping Consumer Behaviors

The summer months are typically a slower period for retailers. But the introduction of Prime Day has added a jolt to sales in this otherwise quiet spending season. Prime Day has now conditioned consumers to expect significant discounts and exclusive deals mid-year. This expectation has led to a shift in shopping patterns, with many consumers delaying purchases in anticipation of Prime Day discounts.

Online shopping

2. Influencing Other Retailers

Competitors

Rival retailers, from Walmart to Target, have responded to Prime Day by launching their own sales events. These competing promotions aim to capture some of the consumer spending frenzy, leading to a broader mid-year sales period across the retail industry. Retailers have adjusted their promotional strategies, inventory management, and marketing efforts to compete with Prime Day. This includes offering price-matching, exclusive deals, and enhanced loyalty programs to attract and retain customers. Salesforce’s Shopping Index revealed that in 2023 online sales for brands and retailers selling directly through their own sites grew by 8% during the time Prime Day was held in early July.

E-commerce shopping clothing

Small and Medium-Sized Amazon Sellers

Amazon Prime Day provides a significant platform for small and medium-sized businesses (SMBs) to reach a larger audience. Many SMBs who sell on Amazon Marketplace experience substantial sales increases during Prime Day, leveraging Amazon’s vast customer base. In 2022, Amazon experienced its largest Prime Day event ever for sellers, the majority of whom are small and medium-sized businesses. Customers spent over $3 billion on more than 100 million items from small businesses.

3. Fulfillment Enhancements

The demand for efficient order fulfillment during Prime Day has pushed Amazon and other retailers to invest in flexible, and scalable infrastructure. Many partner with 3PLs who have the capacity to easily scale up during large sales events. 3PLs have the sophisticated systems, technology, warehouses, and transportation networks needed to expand during high demand periods.

In preparation for the influx of orders a 3PL can implement a series of efficiency improvements to the fulfillment process. For example, the slotting and picking layout can be improved by basing product positions on SKU velocity to eliminate unnecessary steps and improve efficiency. A 3PL can also help pre-pack high-moving products in preparation for the peak period.

4. Market Insights and Data Utilization

Consumer Data Analysis

Prime Day generates a wealth of data on consumer behavior, preferences, and purchasing patterns. Retailers analyze this data to gain insights into market trends, optimize inventory, and tailor future marketing strategies.

Demand Forecasting

Because retailers have had to adjust their marketing, promotion, and sales strategies around Amazon Prime Day, they also need to conduct demand forecasting to accurately predict inventory levels. This will help minimize excess inventory and reduce storage and holding costs. If they predicted incorrectly, it would affect their inventory levels and cashflow for the second half of the year. An experienced 3PL can assist with the complexities of demand forecasting, including using advanced tools that leverage historical sales data and market trends to predict how much inventory to have on hand for the peak period influenced by Amazon Prime day.

Demand Forecasting

Business Intelligence

Any insights gained from the Amazon Prime peak period can influence a retailers strategy moving forward to the holiday season peak period, allowing a retailer to make better, more informed decisions on the marketing, inventory, fulfillment operations, and customer service.

Leveraging Business Intelligence tools provided by a 3PL partner can give retailers end-to-end visibility of their on-hand inventory, open orders, and track-and-trace deliveries during peak periods, and year-round. By seeing a detailed view of their inventory, retailers can better understand the movement of their goods and how much cash is being tied up in inventory. Additionally, by analyzing this data retailers and 3PLs can identify trends and inefficiencies, such as bottle-necks in fulfillment operations, so the processes can be improved.

5. Economic Impact

Prime Day contributes significantly to the economy by driving consumer spending and creating temporary employment opportunities in warehousing, logistics, and customer service. Retailers working with a 3PL can benefit from their flexible labor management to meet additional fulfillment needs. The ripple effect of increased sales benefits various sectors, from manufacturing to transportation.

Ecommerce Warehouse Worker

6. Environmental Impact:

The surge in shopping and delivery activities during Prime Day can raise environmental concerns, particularly related to packaging waste and carbon emissions. Retailers and logistics providers are increasingly adopting sustainable practices to mitigate these impacts, such as eco-friendly packaging and carbon offset programs.

Operational automation technology such a ‘box-on-demand’ can help reduce a retailer’s carbon footprint. This technology intelligently creates boxes that precisely fit the size of the product that is put through the machine. The technology reduces the size of boxes that products are shipped in, which ultimately reduces costs, and the amount of cardboard used. At SCI, our box-on-demand (BOD) automation solution delivers a 25% carbon footprint reduction and significantly impacts dunnage (waste) for all orders run through the BOD solution.

Conclusion

Amazon Prime Day has undeniably transformed the retail industry, creating both opportunities and challenges. For consumers, it offers unparalleled deals and a heightened shopping experience. For retailers, it necessitates strategic adaptations, technological investments, and competitive agility. By partnering with a 3PL, retailers can better prepare for, and compete with, Amazon Prime Day. As Prime Day continues to grow in significance, its impact on the retail landscape will likely deepen, driving innovation and shaping the future of e-commerce.

Partnering with SCI

At SCI we specialize in providing strategic fulfillment solutions to navigate the ever-evolving retail landscape. SCI’s evolution was founded in e-commerce, partnering with Amazon Canada when they first launched over 30 years ago. Since then, we’ve worked with renowned mid-market Canadian and US brands to support their e-commerce growth and help them save millions of dollars.

Leverage our decades of e-commerce experience helping B2C and multi-channel clients optimize their operations, develop a strategic cross-border fulfillment model, grow their business, and deliver a superior customer experience. As leaders in the North American market, we have spent years perfecting best-in-class, end-to-end fulfillment solutions locally and cross-border. The complexity and volume fluctuations of your online orders are handled smoothly, accurately and on time. We’re here to help with daily fluctuations, peaks, and ongoing business cycles that are unique to your ecommerce business.

Contact us to learn how we can help your business successfully scale during peak periods so you get the most out of your sales growth while still seamlessly delivering your promises to your customers.

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