Aug 27, 2020
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About this Deal
This year, Amazon’s Prime Day will look very different to the events of the past five years. Each year, Amazon tinkers with the formula slightly: making the event longer, introducing new promotional vehicles for brands, and highlighting specific Amazon programs. But the backdrop of 2020 will blow all of those incremental changes out of the water. Prime Day will be happening in the midst of a global pandemic which has disrupted supply chains, caused record unemployment, and driven many purchases online.
Against this backdrop, brands have to plan for a Prime Day event that’s unexpectedly occurring in Q4 - the part of the year where many brands and retailers capture the bulk of their annual sales.
The July Prime Day of previous years allowed brands to restock for Q4, and use the event to test out strategies that could be used for the bumper ‘Turkey Five’ shopping holidays in Q4. This year, no such luxury exists.
There is even more divergence than in previous years amongst brands about what is the right strategy for them: to avoid investing in Prime Day this year and bunker down for the Turkey Five, or to take the opportunity to drive sales and acquire new customers in a challenging year.
Calvin Quallis, CEO and Founder at mens’ skincare brand Scotch Porter, says that the brand will not be participating in Prime Day this year. “For us Prime Day is too close to Q4 shopping holidays, when we usually run our very successful annual promotions. However, we have considered formulating a plan to host a deals day on our own site, promoted via our owned channels, on Prime Day.”
In contrast, Nutiva, a company known primarily for organic superfood cooking oils, it will be the first Prime Day that the company will be investing in significantly.
“We’ve seen the trend of Amazon AMZN +2.9% shoppers looking to deals and promotions as a first-time trial driver for food items,” says Anne Thompson, VP of Marketing at Nutiva. The company has experienced a significant spike in Amazon sales as consumers experiment in the kitchen and make purchases online. Thompson adds that health and wellness food items like Nutiva’s often experience a dip in sales during the holiday season, and so the company is excited to have a major promotional window like Prime Day fall in October.
Todd Hassenfelt, Senior Director of Ecommerce at Simple Mills, points out several reasons why brands would choose to invest in Prime Day this year:
If the brand’s core products were deemed non-essential earlier this year when Amazon curtailed deliveries of non-essential items.
If the company’s brick and mortar business is lagging industry averages.
If their products are ”giftable”
If they are new to Amazon and looking to disrupt legacy brands.
If they generally believe that the COVID-19 situation will be in a better place than it is right now, and consumers will be willing to celebrate the holidays and share gifts.
Those brands who have “giftable” items certainly can leverage Amazon through the whole of Q4, not just Prime Day. Hassenfelt says that savvy, giftable brands should suggest the fact that many consumers won’t be able to exchange gifts in-person with extended family and friends this year. Add to that the uncertainly around the US Postal Service’s delivery capability this year. “Amazon, who is shipping a higher percentage of orders themselves, could be the most reliable way to get presents to loved ones fast,” says Hassenfelt.
The Number One ‘Known Unknown’: The Date
There are still many details about Prime Day that are unknown. To be fair, this is true to form - Amazon does not reveal the exact date of Prime Day until a few weeks prior. But the mayhem that COVID has wrought on supply chains for many brands makes it an almost impossible feat to reliably forecast inventory needs for both the usual Q4 sales lift, let alone throwing Prime Day into the mix.
With the added challenge of predicting the date, and many brands simply throw their hands up and say they can’t get the modeling right.
Inventory restrictions can hamper the best-laid plans
Amazon has recently introduced an Inventory Performance Index (IPI) which has caused significant challenges for brands. Essentially, the index is a cap on how much inventory can be sent to Amazon’s Fulfillment Centers. The cap is based largely on inventory turns, which has been problematic of late with supply chain disruptions, and items being deemed non-essential. Further, FBA (Fulfillment By Amazon) sellers have faced significant delays in inventory receiving times at Amazon. A receiving process which previously took 5 days, now can take 20 or even 30 days to complete. All of these uncontrollable factors in turn affect a seller’s IPI, stymieing their ability to have the right amount of inventory available at Amazon Fulfillment Centers.
As such, I recommend to all brands who use FBA to prepare to fulfill their own Amazon orders or engage a 3PL (third party logistics provider). Set these systems up now - it’s an insurance policy worth investing in, for what is the most critical time of the year for most.