Amazon’s Prime Day to Test Consumer Demand

Amazon.com is projecting new heights for this year’s Prime Day, while analysts expect concerns about the economy to weigh on consumer demand.  

The annual summer promotion, an early indicator of shopping patterns for the year, is set for Tuesday and Wednesday at a pivotal moment for the country’s largest online retailer. In recent quarters, the growth rate at Amazon’s online store has slipped, its cloud-computing services business has cooled and the company has cut thousands of jobs. 

“There is a need for some momentum in Amazon’s business,” said Andrew Lipsman, an e-commerce researcher at market-research firm Insider Intelligence. “Prime Day will show how willing consumers are to open up their wallets for retail.” 

The company expects the event to be “bigger and better than ever,” an Amazon spokeswoman said, without defining by which measures.   

Amazon’s overall revenue growth has been stuck below 10% for all but one of the past six reported quarters. For years before that, growth was usually above 25%.  

Amazon is projected to make about $12.9 billion from this year’s Prime Day, up around 11% from last year, with roughly $8 billion in U.S. sales, according to Insider Intelligence. Amazon doesn’t provide detailed financial information for Prime Day. Competitors such as Walmart and Target that run their own promotions around the same time could together record $5.45 billion in U.S. sales, Insider Intelligence said. 

Economists and investors are interested in how still-high inflation and economic uncertainty affect demand. Amazon’s event typically has helped preview the strength of the holiday season. Last year, Amazon’s U.S. Prime Day sales grew just under 10%. That holiday season, total e-commerce sales increased by 9%, according to Insider Intelligence.

“Macro headwinds will likely continue to pressure consumer spending,” J.P. Morgan analyst Doug Anmuth wrote in June. 

The sales event is also an important tool for Amazon to gain subscribers to its Prime service, Anmuth wrote. The bank estimates that there will be almost 300 million Prime members by the end of the year, up from around 200 million in 2021. 

Analysts will be looking for a return in demand for computer and consumer-electronics products. Electronics sales have tumbled from Covid-19 pandemic highs. The category is also one of Amazon’s largest and one that Amazon promotes heavily on Prime Day.  

In recent years, Prime Day hasn’t been quite the consumer draw it once was. In the past two years, Prime Day’s growth in the U.S. has been under 10%. In its early years, growth hit around 60%, according to Insider Intelligence. 

Amazon doesn’t invest as much in the event as it has in the past, and many of its promotions in recent years have been focused on the company’s own products. Discounts offered through the Thanksgiving weekend of Black Friday and into Cyber Monday in some categories have in the past been twice as large as on Prime Day, according to Adobe Analytics. 

Still, the summer event drives extra sales for Amazon and other retailers. Prime Day could result in more than three times the average day’s sales for the company this quarter, J.P. Morgan estimated. 

“We know our customers love great deals, and we are optimistic they will prove the naysayers wrong,” the Amazon spokeswoman said. 

Amazon shares have climbed around 50% so far this year, well above the Nasdaq Composite Index’s rally of around 30%, amid optimism about Amazon’s moves to cut costs and anticipation that the company’s cloud-business growth will rebound.

Amazon started Prime Day in 2015 to increase sales during the slower summer months and to boost Prime memberships. Only Prime subscribers can access the deals. Executives were inspired by Chinese e-commerce giant Alibaba Group Holding, which since 2009 has held a successful sales event known as Singles Day in November that featured concerts and celebrity appearances. 

Last year, Amazon held a second Prime Day-like event in the fall. It helped increase Amazon’s revenue in the fourth quarter, its most important period.

Write to Sebastian Herrera at [email protected]