More is behind 2019’s Amazon Prime Day Success
The record-breaking success of 2019’s Amazon Prime Day is foretelling dramatic retailing changes that are adding more value to network and ecosystem development as a competitive requirement.
Amazon reported record sales on its extended Amazon Prime Day this summer. The company reported Prime members worldwide purchased more than 175 million items throughout the two-day event. Sales surpassed the company’s previous Black Friday and Cyber Monday sales combined, dominated by Amazon brand sales, such as Echo Dot, Fire TV Stick, Alexa voice remote, and more. It was also the biggest days ever for Amazon Prime membership, Amazon reported. The promotion also included streaming entertainment and sports, plus discounts at Whole Foods, the grocery Amazon acquired in 2017.
The record success is a harbinger of new retailing that could command 30% of global economic output, analysts project.
However, savvy retailers who planned to be part of the frenzy also saw increased sales from their campaigns. More significantly, the phenomenon also is revealing the requirement that to be competitive, smaller retailers will need to create their own ecosystems of not only retail and customer-facing services but also back-end support to consolidate technology and administrative capabilities.
While Amazon Prime Day definitely was a boon for larger retailers who created their own promotions for Amazon Prime Day, smaller and niche retailers also saw significant sales boosts.
Jason Woosley, Adobe Analytics VP of commerce product and platform, said email campaigns and value-added service deals contributed to a 64 percent comp sales increase among major retailers. Rob Garf, Salesforce’s VP of industry strategy and insights, said increases at big and smaller retailers were the results of intentional marketing and campaigning for Amazon Prime Day.
Garf said Salesforce saw email volume increase 24 percent during Prime Day, and only 11 percent of those running deals even referenced “Prime Day” in promotions, choosing instead to be creative and deploy their own campaign themes. See more on the Salesforce analysis here.
A McKinsey analysis emphasizes that the short-term event continues to leverage Amazon’s ability to build valuable long-term shopper relationships and strengthen its widening ecosystem of offerings. The ecosystem strategy has significant competitive implications that McKinsey projects ultimately will consolidate 30 percent of the world’s gross economic output in the next 10 years. That means a third of the world economic output “will be from companies that operate a network of interconnected businesses, such as those run by Amazon, Alibaba, Google, and Facebook.” Customers will become accustomed to doing business within the network because of convenience, price, and reliability, the analysts believe.
During Prime Day, Amazon streamed several major events, including world soccer competitions and concerts by leading country-music and pop musical artists. Amazon connected its private label products, sales and affiliate services, its Whole Foods grocery division, and entertainment products.
A team of analysts led by Venkat Atluri, a senior partner in McKinsey’s Chicago office, increasingly sees retail sectors creating logically connected networks of goods and services built on shared technologies and complementary partners. Digital networks can present an array of financing, support, data services, logistics, and other services that are part of the value chain. Atluri’s team believes that bringing partners and complementary services together to create a consolidated service network will give retailers the ability to build and maintain customer relationships while sustaining core-value propositions, distinct competitive advantages, and fundamental human and organizational needs. More critical is the ability to tie data and technologies into a broader network that can be more affordable and effective.
For smaller local and regional retailers, this means creating a shared network that powers and empowers local marketing, sales, and distribution.
Atluri’s team recommends focusing on four key priorities to build competitive networks:
Adopt an ecosystem mindset. Retailers especially need to broaden their view of competitors and opportunities to bring new—and likely unconventional—partners and solutions to the table. This will require thinking through organizational and leadership issues that may be beyond your four walls and looking differently at strategic priorities. Combinations that make good sense “will be part of a rational answer to perennial strategic questions about where and how your company needs to compete—playing out on an expanding field.”
Follow the Data. To compete effectively, networks and ecosystems need to collect large amounts of data and develop capabilities for storing, processing, translating data into actional business insights. New partnerships could open the door to ever-finer microsegmentation and provide richer consumer insights across the network. Better data also supports enhanced scenario planning, better use of data to create value, and critical insights not otherwise available.
Build emotional ties to customers. Data and data technologies enhance customer offerings, provide content and content marketing that capture customer attention, and create seamless customer journeys to solve pain points. Better knowing and engaging your customers help you take action to keep and expand your customer base.
Change your partnership paradigm. New partnerships should make the whole greater than the sum of its parts, Atluri suggests. Ask yourself which partners would help you fill a gap in products or services, which would provide an operational framework for capability and efficiency, or what other services or capabilities would improve your marketplace position.
Retail will always be local, and the local store connects to people in ways online can’t always do. Having the capability to remain local or regional with economies of scale and richer data insights will only help smaller retailers survive and thrive.