Amazon's Prime Day Generates Estimated $1 Billion in Sales

  • Echo Dot, discounted 30%, was best-seller during 30-hour sale
  • The annual event grew by more than 60 percent from a year ago

Amazon's Echo Speaker a Best Seller on Prime Day

Amazon.com Inc. said its third annual Prime Day sales event was the biggest day ever for the e-commerce giant, with revenue surpassing traditional retailing blowouts like Black Friday and Cyber Monday.

The 30-hour sale, featuring discounts on a broad assortment of goods, generated about $1 billion in revenue for the Seattle-based web retailer, according to separate estimates from analysts at Cowen & Co. and JPMorgan Chase & Co.. That’s triple its average daily e-commerce revenue in 2016, according to data compiled by Bloomberg.

The most popular purchase during the sale was Amazon’s Echo Dot mini-speaker, which was discounted by 30 percent. Having extended the shopping spree by six hours, it grew by more than 60 percent compared with the same period a year earlier, the company said Wednesday in a statement. The promotion also saw an influx of new Prime members, Amazon said.

Amazon Prime costs $99 a year and provides perks such as free two-day shipping on many items as well as music and video streaming. “Tens of millions” of Prime members made a purchase during the sale this year, more than 50 percent higher than last year, Amazon said. The company uses the July event to promote Prime membership and convert the occasional Amazon shopper into a devotee. That means Amazon can take a loss on the day and recoup the money later with a larger base of loyal shoppers.

Winning shopper loyalty through membership programs is a big challenge for retailers, but Amazon has found a winning formula with Prime, said Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University.

“Academic research has shown that consumers have lots of difficulty predicting their future preferences, hence it is very hard for them to predict and hence decide whether they will use Prime to its fullest extent or not,” he said. “However, by conducting Prime Day, Amazon allows consumers to have lots and lots of the greatest deals on one day. By buying these deals consumers may figure out immediately whether they can recoup the benefits of Prime all in one day. Once they get Prime they have a tendency to consolidate their purchases on Amazon.”

Increasing Competition

The Prime business model is under increasing competition. Wal-Mart Stores Inc. in January began offering free two-day shipping on millions of items without a membership. And Macy’s Inc. offered free shipping on all orders, regardless of price, Tuesday only.

Amazon used steep discounts to turn its Echo speaker line into a best-seller. Even if Amazon loses money on the device sales, it gets a toehold for its Alexa digital voice-assistant platform to become more connected to shoppers who can use it to check the weather, stream music, hail an Uber, order pizza -- and of course buy more from Amazon -- by voice command.

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The original Echo model was discounted 50 percent to $90. Amazon said Prime members purchased seven times more Amazon Echo devices globally than during the event last year.

Amazon has been introducing new lines of the speakers that have screens and can take pictures. The company is betting heavily on the devices to keep ahead of Alphabet Inc.’s Google and Apple Inc. in the emerging field of voice-based computing.

“They see voice as the third-generation platform for ordering things online,” said Matt Sargent, senior vice president of retail at the Minneapolis consulting firm Frank N. Magid Associates. “They want these devices in as many places as possible in case people shift from ordering on mobile devices to ordering with their voices.”

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