Online sales on the wane? What we can learn from Amazon Prime Day

Stuart Lauchlan Profile picture for user slauchlan July 18, 2022 Audio mode
Summary:
We all love a bargain, right? So the Amazon Prime event should have us back online and looking for a deal? Well, up to a point...

decline

Last week diginomica asked whether online spending was on the wane among US consumers, a question posed on the back of a new report from e-commerce specialist Attest. Publication came, as we noted, during this year’s Amazon Prime event, something which, according to the firm, was a massive success.

While Amazon doesn’t release official figures for total sales, the company says that Prime members purchased more than 300 million items worldwide during the two day even,  up from 250 million last year. That makes it the biggest Prime event to date, with more than 60,000 items purchased per minute in the US alone.

With Amazon tightlipped as to how that translates into hard cash, third party analysis from Adobe’s Digital Economy Index suggests that around $11.9 billion was spent across the event, with $6 billion spent on day one and $5.9 billion on day two. That being so, that would represent 8.5%  year-on-year growth.  Pat Brown, Adobe VP, said in a statement:

With the second Prime Day also seeing strong gains, retailers were able to generate approximately $12 billion in online spend, across the two-day event. With ‘back-to-school’ around the corner and promotional discounts being quite favorable for consumers; we saw accelerated growth momentum for days that have historically produced significant spending. It’s apparent that consumers are incredibly price conscious, and it will be important for retailers to leverage price effectively, in order unlock new growth potential online.”

Rising inflation might have been expected to take its toll on Prime numbers this year, but according to a study by supply chain management firm Blue Yonder of 1,162 consumers, the impact wasn’t as bad as might have been expected. Some 59% of those polled had made a purchase during the Prime event, down from 61% last year. Furthermore, 48% said they spent more this year, while nearly a quarter (23%) said they spent ‘significantly more’.

But...

All that said, Salesforce offers a somewhat more downbeat assessment, with Caila Schwartz, Direct of Consumer Strategy and Insights, noting:

Global online sales for non-Amazon sites were down 12% compared to Prime Day 2021. And last year’s event, which took place in the middle of June, was already soft compared to Prime Day in 2019 and 2020. Is it shopper burnout or over-saturation in several key markets? 

Salesforce’s conclusion is that it is the latter. Looking at the data broken down by country, it’s clear that Prime Day growth levels vary significantly by geography. APAC (excluding Japan, Australia, and New Zealand) topped the league with 14% year-on-year growth, followed by Italy (8%) and Belgium (8%).

Elsewhere there are some grim numbers on offer. The Nordics saw a 36% year-on-year decline, followed by Germany with -33%. The UK turned in -13%, Japan -11% and the USA -10%.

In terms of what products were being bought, Salesforce’s data finds that the largest growth was in Active/Footwear, up 23% year-on-year, followed by General Handbags/Luggage on 21%.  In contrast, Toys and Learning reported -60% growth, while Home/Appliances were down 40% year-on-year.

A big question now is whether 2022 will see a return to serious levels of discounting in order to fuel demand?  That hasn’t been seen so far, although there remains an expectation that as the Holiday season approaches, this will change. But for now, the global average remains pretty flat year-on-year, 16% in 2022 to date compared to 15% last year.  Schwartz observes:

After a year of rising prices and low discounting due to strong demand, the return of discounting is welcome news for all consumers. While we anticipate earlier and steeper discounts as we approach the holidays, our data shows this didn’t take hold in the first half of 2022.

For Prime Day itself, 16% was the average discount rate, up from 13% last year. General Apparel offered the best deals, averaging 25% discounts compared to 19% last year, but that still wasn’t enough to prevent an 11% year-on-year decline. And it’s notable that Home/Appliances big negative growth number wasn’t helped by an average 23% discount rate, up from last year’s 18%.

My take

Well, that’s that over for another year - although there is scuttlebutt that we might get another spin at this in October - and yet again, I failed to make a single purchase!

The best interpretation, despite Amazon’s inevitable upbeat but lacking-in-detail noises, would be that things remain relatively flat overall. Salesforce’s Schwartz notes:

The number of unique online shoppers remained flat in the second quarter from a year earlier. In other words, volume stayed the same; few people have actually shifted from digital. So consumers aren’t simply ditching digital stores for physical stores. In fact, online traffic volume declined only 2% this quarter compared to 2021, making traffic volumes essentially flat. This means that people were still shopping online at nearly the same rates as in 2021. 

The rumors of death around online shopping may be exaggerated, but there’s a sense of a definite slowing down, one that’s made Wall Street’s short term thinkers very jittery in recent months. As we’ve said time and again, the focus for retailers now has to be on striking the necessary omni-channel balance between physical and digital in the Vaccine Economy.

 

 

 

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