Amazon's Prime Day sale topped expectations and drove record revenues during a normally slow period. Many people were frustrated with how the sale was held, but in the end, the company saw more orders than it did on Black Friday of 2014; 34.4 million items to be exact.
Beyond the numbers that were in the press release (266% increase in worldwide orders and 18% ahead of Black Friday), there were a few ideas that I wanted to point out in regards to the competition and the implications for future Prime Days.
The first concept I wanted to address is the one that was on Twitter and Stocktwits about Wal-Mart (WMT) and
Best Buy (BBY) offering a price match on select items.
I can attest first hand that my purchase of a Fitbit (FIT - Free Report) was something that I planned on for some time, but when I saw that it was about $7 less than just about anywhere I had ever seen it, I added it to my cart. Next thing I knew, my purchase qualified me for a $25 credit; so without doing any price matching on my own, I received the benefit of a price that Best Buy was offering for the same device.
I am the first to admit that I am not a fan of Wal-Mart (WMT) and I even went so far as to suggest that it is time to break that company up. On the other hand, my colleague, David Bartosiak is not a Prime member and had different reasons to visit Walmart on "Rollback Wednesday".
At the end of the day, Wal-Mart and Best Buy are lowering prices for select items one day. On the other hand, Amazon is attracting tons of new incentive laden customers to use their Prime service to get a good price and then have access to online storage, instant videos and more. The question becomes how profitable can the company make these new Prime customers?
Training On Deals
Many of the complaints about Prime Day were focused on the same idea; there were not enough deals or the
merchandise selection just wasn't there. I must admit, I thought there could have been a blanket discount on a shopping cart, but I was naive to think that.
The average customer saw a list of deals, and most of them were not the things that everyone would buy. That said, there were still plenty of "household items" like toilet paper and the like that, truly, everyone does buy. Those items were only available for a precious few minutes and quickly sold out.
What Prime Day might serve to do in the future, is to get customers to come back to Amazon, if not on a daily basis, at least on a weekly basis just to check its "daily deals" section. This is really bad news for companies like Groupon (GRPN - Free Report) and Overstock (OSTK) which make their living in the "deal" space.
Mike Mitchell, COO of MMP Living, a home goods and toy retailer that uses Fulfillment by Amazon, noted that every one of their deals were 100% sold out. For sellers there could be no better outcome.
There is no doubt that Amazon squeezed the sellers for the best deals they could give to the consumers, but on the other end of the bargain is the sell through. Most companies don't want to offer steep discounts, even on massive amounts of product as they feel it hurts the overall pricing power. That is really not the case when demand exceeds supply and the detractors of a low price point is made up in high volume sold (in one day).
This means that the next Prime Day will likely offer many, many more deals to consumers as sellers realize that Amazon is willing to spend on promotion to get people shopping. I saw several commercials for Amazon during the All Star game the night before #PrimeDay, including some in game ads behind home plate.
Earnings Coming Soon
Prime Day was definitely a success for Amazon, and could end up being great news for AMZN investors as well. The company reports earnings after the bell on Thursday July 23rd, and given the recent moster earnings perfromance from fellow tech giants such as Netflix(NFLX - Free Report) and Google (GOOGL - Free Report) , Amazon could be "primed" to move higher following its earnings release.
In fact, one Wall Street analyst projected 20M orders for Prime Day resulting in a lift of 1% to 3% in sales. The
actual number was 34.4M orders so there is a good chance that revenue estimates for next quarter (which stand at $23.7B) could soon lift by about 2-4% and that will have an impact on expected earnings as well.
Shares of Amazon currently have a Zacks Rank #2 (Buy) and they also have a positive earnings ESP. This is a powerful mix as nearly 80% of the time, this combination indicates a beat at earnings season. But when you add in the impact of pulling off the biggest shopping day of the year in Mid-July, there is plenty of reason to believe that Prime Day will give Amazon investors an extra boost this season.
In the spirit of full disclosure I have to mention that I am long AMZN calls.
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