Here’s How Amazon Spawned Prime Day, Its Big Summer Sale
Also this year, as my colleague Spencer Soper has reported, Jeff Bezos and Co. are using the event to bring Whole Foods grocery stores further under the Amazon umbrella. Can Prime Day help sell cereal and cod? Well, folks, we’re gonna find out.
As your resident Amazon historian, I’ve been interested in the origins and evolution of Prime Day. Most observers have assumed it’s a knockoff of Alibaba Group Holding Ltd.’s Singles Day, an annual shopping bonanza the Chinese e-commerce giant started in 2009 and which generated an astounding $25 billion in sales last year.
But Singles Day is in November, kicking off a busy buying season in China. Prime Day has more in common with events like Nordstrom’s Half-Yearly Sale, a door-buster meant to relieve the retail industry’s doldrums of summer.
Discussions inside Amazon about creating a “Christmas in summer” go back to the mid-2000s, say former Amazon executives. Bezos wanted to figure out how to utilize all the fulfillment space, technology and workers in Amazon’s warehouses during the summer lull, when people spend more money on vacations than flat-panel TVs and laptops.
But for such a big sale to work without destroying profit margins, tiny little Amazon would have to persuade big brands and vendors to finance the discounts themselves. Amazon would have to convince them that steep price cuts wouldn’t eat into their profits in other stores.
A decade passed before the increase in Amazon’s size, and in Prime membership, started to make all this plausible. With tens of millions of Prime members eager to spend, Amazon could push vendors to fund Prime Day discounts. It could also make the argument that because only Prime members can access the deals, it wouldn’t impact a brand’s sales elsewhere.
Bezos felt that the time was right to try the concept on the 10th anniversary of Amazon Prime, in 2015. He asked Greg Greeley, then vice president of Amazon Prime and delivery experience (and now an exec at Airbnb), to oversee the composition of a six-page narrative memo that introduced the concept inside the company.
A lot about Prime Day has evolved since then. Amazon now uses the sale to prominently feature its own Kindle, Fire and Echo hardware, as well as couches, dresses, batteries, fish-oil and time-released Vitamin B12, under several dozen Amazon-owned brands, like Amazon Basics and Solimo. Amazon now has more private-label brands than ever and can better control the scope and scale of the discounts on these items.
The other thing that’s changed about Prime Day during its short life is the secrecy surrounding it. The actual date has now become something of a state secret and is kept under lock and key for months. And Amazon appears to require all vendors to sign strict non-disclosure agreements, which makes them almost comically reluctant to talk about their deals with the company.
For example, when Bloomberg contacted General Mills for information about its Prime Day promotion, the company declined to provide much detail beyond a press release titled: “Buzzworthy: Honey Nut Cheerios Makes Good Go Round by Giving Away Free Family-Size boxes of Cereal in Honor of Amazon Prime Day.”
Even this paucity of information about Prime Day is informative, in a way. It suggests that Amazon is positioning the event to fit within a corporate strategy that could drive the next decade—something that can juice traffic into Whole Foods, enliven the otherwise dead fulfillment centers during the summer, and yes, maybe even rival the might and scale of Alibaba’s Singles Day. Or maybe they just want to sell some more Cheerios.
And here’s what you need to know in global technology news
No meat for you. In another sign of companies taking pro-environment stances, the office-rental company WeWork informed its 6,000 global staff that they can no longer expense meals that include meat.
Ditching your laptop for an iPad? Adobe is prepared to make it easier, by developing a full version of Photoshop for Apple’s tablet.
Facebook joins the microprocessor wars. The social network has hired a vice president of silicon and appears ready to join Apple, Alphabet, Google and Amazon in making its own chips.
Microsoft has rebooted. Amy Hood re-imagined the CFO job and played a key role in persuading employees, customers and investors to believe in the company again.
©2018 Bloomberg L.P.