Published on July 5th, 2018 | by The GC Team0
Prime Day will be a $1.6bn loss-leader
Amazon’s Prime Day is the biggest loss-leader in history, says e-commerce delivery firm ParcelHero’s David Jinks MILT, and this year’s revenues could easily top $1.6bn, up 60% on last year, while the event will entice millions more shoppers into Prime membership.
Jinks, Head of Consumer Research at the delivery company, says Amazon is really “priming the pump” this year with its special deals. It will offer even bigger bargains than in 2017 as it attempts to lure more Prime members to add to the 100 million it already has.
Jinks told an audience of industry professionals at Post &Parcel Live in London that Amazon aims to become the pipe through which everything we buy is delivered. He believes Prime Day is a key part of this strategy.
“Prime members spend double the amount non-members spend, so Prime Day is a big hook to reel in more members. Even though it creates a huge income, it certainly doesn’t generate huge profits – as many participating traders will confirm. It is really a promotional event to get more people joining Amazon Prime.
“Amazon can afford to take a big hit on the day because it will more than gain that money back long-term though its expanded base of loyal, high-spending members.”
Jinks acknowledged that the true numbers for Prime day are tricky to pin down, but said JPMorgan Chase and Cowen & Co both believe last year saw $1billion in revenue on the day.
“That seems sensible, and with growth last year of 60% and Amazon pushing its Prime services even harder, $1.6bn seems a likely figure. A day and a half of bargains – with huge discounts on items like Amazon Dot – could see the e-commerce giant raise an easy million or so more members globally.”
Jinks says Amazon is prepared to deal in wafer-thin margins to gain new members. “In its first 14 years,” he advises “it scarcely ever turned a profit, but long-term shareholders don’t care; they know the end game.”
And that “end game” is, believes Jinks: “Eventually most of the products we buy may well be either bought or delivered through Amazon. And that’s when it realises those potential huge profits.”
This year’s Amazon Prime Day will take place from midday on July 16th to midnight on July 17th.
Picture: Amazon’s Hemel Hempstead fulfilment centre