What Amazon Prime Day Really Means for the 2018 Holiday Season

With Amazon creating a true Christmas in July with its annual Prime Day, thoughts about the actual holidays have begun. And so far, those thoughts are happy, thanks to a strong economy, low unemployment and high consumer confidence.

It’s a very different picture than the one the sector faced last summer, when store doors were closing and “retail apocalypse” headlines were pervasive. At the time, it would have been hard to imagine the rally that produced the biggest holiday sales increase since 2010 — or the chunk of sales for which Amazon alone was responsible. The e-commerce juggernaut accounted for between 45 percent and 50 percent of online sales on Black Friday last year, according to market research firm GBH Insights. The lure of free shipping helped entice 4 million shoppers to opt for a Prime membership or trial during the period, and Prime spending shot up by 22 percent.With stats like that, what are other stores supposed to do?One thing’s for sure, according to Tiffany Hogan, senior analyst of apparel at Kantar Consulting, is that a tit-for-tat discounting strategy won’t be enough. Using Prime Day as an example, Hogan said the retailers that are most successful are those that come up with a strategy that speaks to their core shoppers.

“Offering [deals] to loyalty shoppers in general is a better way to pull their shoppers away because, really, Prime Day is a loyalty event,” she said. “If retailers can counteract it with their own loyalty event versus an everyone event, I think that might help them earn points with their key shoppers, which is the focus of a lot of retailers.”

Hogan also advises retailers to lean into their store fleets and the advantages they provide. Buy online, pick up in store, she said, is an example of how physical doors can differentiate themselves. The focus, however, should be different than it has been in recent seasons.

“Being able to bring shoppers in-store even if it is just for the experience of picking something up is a really important connecting point,” Hogan said, adding that the focus shouldn’t be the up-sell. “The best thing retailers can do is leverage that and make that a seamless experience, an expedient service that will help them compete better with Amazon.”

Whatever they decide to do, it’s important for other retailers to be a part of the conversation, she said. And history seems to bear that out. In 2017, RetailMeNot.com found that stores that offered discounts during Prime Day saw a 40 percent increase in traffic, compared with the 4 percent dip experienced by those that did not.

But going head-to-head with Amazon doesn’t mean simply aping the online behemoth’s business model. Quite the opposite, according to Roshan Varma, director, New York, at AlixPartners.

“Competing with them requires attacking Amazon’s unique value proposition with one of your own,” Varma said. For instance, he explained, part of Amazon’s appeal is its endless aisle. Other retailers should focus on creating curated selections backed by appealing editorial content. Further, where Amazon has focused on more affluent shoppers, stores can hone in on other demographics.

While differentiating is key, Varma said there’s at least one area where traditional chains can compete successfully in a very Amazon-ian arena.

“Where Amazon has their circular loop of customer data, the question is: How can retailers use their additional customer touch points to really have a broader picture of their in-store behavior, their e-commerce behavior and their media behavior online to get a fuller picture?” he said.

Whatever the strategy, Varma said the battle starts now.

Retailers, he said, must “build their brands through summer and back-to-school, which will allow them to stay relevant in the holidays,” build loyalty and ease the competition aspect during crunch time.

Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.
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