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Hi, everyone. Today is Wednesday, July 1st. Welcome to EMARKETER's weekly retail show, Reimagining Retail, an EMARKETER podcast made possible by Rokt. This is the show where we talk about how retail collides with every part of our lives. And I'm your host, Suzy Davidkhanian. On today's episode, we're unpacking Amazon Prime Day. The event once again generated record-breaking online sales, but beyond the headlines, what did it actually tell us about today's consumer, and what should retailers and brands take away as they prepare for the holiday season? Joining me today, we have two of our podcast regulars, principal analysts, Sky Canaves joining us from Texas. Hey, Sky.

Sky Canaves:

Hey, Suzy.

Suzy Davidkhanian:

And we have Zak Stambor, joining us from Chicago, or Illinois. Hey, Zak.

Zak Stambor:

Hi, Suzy. Hi, Sky.

Suzy Davidkhanian:

So, Prime Day has come a long way from its original one-day event, this year it's stretched to four days, moved into June, which I think is the earliest it's ever been, and has become one of our real first reads on how consumers are feeling, what they're prioritizing, and how they're choosing to spend their money. So, this year shoppers really continued to show up, groundbreaking sales, but they definitely shopped differently. They bought more everyday essentials, they leaned into value again, and gave us an early glimpse into what could actually matter the most this holiday season. So, today we're looking beyond the sales numbers, we're going to unpack what Prime Day revealed about the consumer, what it says about Amazon's broader strategy, and what retailers and brands should be paying attention to as they gear up for Q4.

Okay, but before we dive in, everybody saw the numerator numbers, they found that on average households spent about $143 this Prime Day, which was down slightly from last year's $156. Did you each spend more or less than the average? Zak?

Zak Stambor:

More.

Suzy Davidkhanian:

More.

Zak Stambor:

Definitely more. Yeah.

Suzy Davidkhanian:

Sky?

Sky Canaves:

Yeah, I'm pretty sure I spent more.

Suzy Davidkhanian:

I wouldn't have spent more if it wasn't for the kettle I needed, but otherwise... And it's very hard to find a non-plastic, FDA approved, all the stuff that makes you worry about plastics, at a really good price. Cool. So, again, it was averages, but beyond that, tell us more about what surprised each of you this year. Sky?

Sky Canaves:

I think what surprised me most was not so much anything from the sales data or consumer behavior, because watching Amazon and writing a report on Prime Day had a pretty good read on what we expected, and I think our forecasts were pretty spot on. But one thing that did really catch my eye was that Amazon took this occasion to start advertising on ChatGPT, and it was just advertising the Prime Day sale in the little format that's available in ChatGPT ads. It's not a great ad format, there isn't much to it yet. And it's something I'm still trying to process, I think it's just an experiment at this point.

But it just goes to show how everyone is really trying to figure out how to advertise on these conversational AI platforms, because even though the traffic that they're driving to retailers is pretty small, and especially small for Amazon, which blocks the chatbots, that traffic does convert a lot better than traffic from other sources, and it's associated with more engagement and higher spending. So, that's definitely something to keep an eye on.

Suzy Davidkhanian:

Zak, what about you? Outside of the numbers, what surprised you?

Zak Stambor:

Yeah, I just thought it was interesting to see how consumers are getting harder to please. While Adobe reported discounts were pretty much in line with last year, electronics peaked at 24%, compared to 23% last year, apparel was 24%, the exact same rate as last year, toys was within one percentage point. The share of people who said they were satisfied with the deal was considerably lower than last year, 59% versus 68%. So, it just goes to show how consumer expectations just continue to shift and they want more and more discounts.

Sky Canaves:

Yeah, shoppers are definitely wanting bigger discounts, and then if they're not getting them, I think they're not as likely to pull the trigger.

Suzy Davidkhanian:

Well, which matches the data that two-thirds of households went back to place orders two or more times. And so, they were waiting potentially to see if whatever they had their eye on was going to be at a lower price. Which makes me think it's always been about deals Amazon Prime, but like you guys both just said, people are also thinking about how they're shopping, and what they're shopping for, when they're shopping, a little bit differently. What's changing?

Zak Stambor:

I think consumers are looking at the sale in two different ways. On one end, they are just using it to stock up and save when they see a good deal. So, if they know they will need toilet paper, they will buy toilet paper for $2 less. They know they will need detergent, they buy it. So, I think they're stocking up on one end. On the other end, they're looking to discounts to justify splurging a little bit more, buying a slightly more expensive product. And the data shows that across categories the share of the most expensive goods was up quite a lot, 19% versus year-to-date. And some categories like electronics and toys, it was considerably higher than that.

Sky Canaves:

And at the same time, the average price per item sold during Prime Day keeps dropping. I noted that it was only around $23 this year according to Numerator, and we can look back at their data going back to 2019, when it was closer to $34. And it's not because prices are falling or the discounts are that huge, it's just about everything is more expensive nowadays. But the composition of what people buy on Amazon or during Prime Day has fundamentally changed, some of the top-selling items are things like pet treats, protein shakes, trash bags, really everyday items that people do wait for the sale to stock up on.

Zak Stambor:

Totally. And what's different this year compared to last year is Amazon began folding in perishables into same-day delivery. And so, when you add those sorts of purchases, carton of eggs or a gallon of milk, that drives down the average spend. So, it makes sense to me to see that.

Sky Canaves:

Yeah. Even further. And that also creates more opportunities for people to shop and buy, I think this expansion of Prime Day into four days, people keep coming back because there are so many more categories that they're buying. They're not just buying a TV or a computer, where maybe you just need one or two days to do your research, see the sale, and make the decision. But I think one thing that Amazon's noted that really is striking is that they say in the places where fresh and perishable same-day delivery is available, nine of the top 10 selling items in those places are fresh and perishable goods, and that's kind of shocking because it's been less than a year, this is the first Prime Day we have this fresh and perishable grocery delivery available as part of the-

Suzy Davidkhanian:

The basket.

Sky Canaves:

Yeah.

Suzy Davidkhanian:

As part of the basket. Well, it's interesting too because I feel like originally Prime Day was about discovering and being inspired to buy things that maybe you weren't going to buy before, but you saw it and it's on sale, and now it's almost like they've realized people are stressed financially, and fragile, and it's permission to stock up, like you were saying, Zak. But do you guys think that with this move into groceries and every day, where it's available, is there a shift happening in how Amazon is thinking about their retail strategy? Is Prime Day becoming way more than just the four days and maybe setting habits?

Sky Canaves:

Oh, I think absolutely. We saw Prime Day started out as his hook to get people to join Prime, and with the focus on electronics, and now it's so much more about focusing on the value of the Prime membership, and reinforcing that with opportunities to save across categories. And grocery is a big battleground for Amazon, because it's such a frequent purchase category, there's so much loyalty potentially attached to grocery, and Amazon wants to encourage that sticky habit of buying grocery because those habitual shoppers then will turn to Amazon for everything else that they might need.

Zak Stambor:

Yeah. And I mean, it just reinforces Amazon's convenience play, it is so easy when you order a carton of eggs and it shows up an hour later, or two hours later, it makes you go back to Amazon. And so, it makes a whole lot of sense for Amazon to lean in this direction.

Suzy Davidkhanian:

The other thing that's really interesting about this grocery play, it's not only creating habits, but all we do is talk about retail together, when we were talking about this off-air, you guys were also talking about how this might be another way that Amazon is trying to create extra dominance in its retail media network, and how there's a lot of advertising dollars to be had. Can you tell me a little bit more about that, Sky?

Sky Canaves:

So, I think it's because delivering a single carton of eggs or a gallon of milk that are added on to online orders isn't really a profitable business, grocery is already such a low margin business, but I think they're making the bigger longer term play to become a grocer of choice on a regular basis for more consumers, and that can then help draw more advertiser dollars from more of the big CPG brands. Who will advertise not only on Amazon at the point of purchase, but further up the funnel across Amazon's ad offerings.

Suzy Davidkhanian:

Well, and it's interesting because we have talked at length about Amazon and grocery, and how it's like that one Achilles heel that it can't quite figure out how to make it work. So, maybe now it's using its tentpole event to try and figure out how to gain market share in this space. I'm going to switch gears now, and I want to ask you guys a little bit more about... Because how can we not be talking about AI? It feels like Prime Day also became a showcase for how Amazon is trying to think about the shopping experience between AI, between personalized deal pages, all the different recommendations, the what's trending, do you think this is Amazon making it easier for folks, or a little bit more complicated? Zak?

Zak Stambor:

Both. I think it's both. So, I think some of the initiatives like the personalized deal pages certainly make it easier to shop. We buy a very obscure laundry detergent that would never be one of the products showcased to the broad public, but lo and behold, it was front and center as a Prime Day deal, and even though we have plenty of it here now, it almost made me click and buy it, because I was like, "Oh, well, this is a good deal." So, I think that sort of thing certainly makes it easier to shop. The AI pieces shifting to more of a conversational flow can be easier, but it's also a behavioral shift that you have to train people on. And so, I think some people will pick it up very easily, and some people will just want things to be the way that they know and like and are accustomed to. So, on that end, I think it's kind of a mixed bag.

Sky Canaves:

Yeah. When I look at the home screen during Prime Day, it seems like there's so many moving parts, and it's just one of them is going to catch your eye and hopefully get you to buy something. For me, it was very simple, it did make it easier when I can just look at the things I've bought before, and see which ones have a compelling discount, and that's most of what I bought was from scanning that list. For someone else, it might be looking at the big deals, the 40% off, they're looking to make a score a good deal on an impulse type of purchase. But I think all of the personalization can make it harder for brands to stand out in that Prime Day moment, and be able to cast a wider net for shoppers outside of that hyper-targeted personalization space, like Zak, that you mentioned, with a really obscure product that you've already bought or have followed.

So, for brands, they have to be willing to either spend a lot more to build that upper funnel awareness and start the targeting well before Prime Day, or then offer those very substantial 40, 50% off discounts that can get in front of every shopper for a time.

Suzy Davidkhanian:

And this also... I mean, you're right, AI may be changing the visibility for brands on the retailer's website, but I also think Amazon's inspiration mode, it's aspiring to be a place where people go to discover new things in this way, it feels so cluttered that it's hard to find new things that you didn't even know you needed. It feels much more like a search space.

Sky Canaves:

Yeah. So, I think shoppers end up looking for inspiration on other channels, like on TikTok, or social media, or the deals and reviews sites and pages that they follow, where they are seeing a much easier to follow or easier to engage with, better discovery experience than what they get on Amazon.

Zak Stambor:

Well, and that's where the Wirecutters of the universe are so valuable to Amazon because they just drive that traffic in a completely different way.

Suzy Davidkhanian:

It's interesting. So, now if I'm the CEO of Target or Walmart or any other retailer really, what is the biggest lesson that I should learn from this year's Prime Day, and how am I going to compete with Amazon? What do I do either to compete directly with them or potentially to set myself apart, like maybe a better discovery engine? Zak?

Zak Stambor:

Yeah, I think there's a few different levers that you can pull. One is you don't need to completely align your event with Prime Day, you could extend it longer, you could try to jumpstart the sale on the front end, or extend longer than it, or do both. And then you can also just lean into the things that differentiate your business. So, Target has been doing a pretty good job with merchandising this year, leaning into its private labels, and partnering with a whole number of interesting brands. So, focus on those because those make Target different, there's a reason to go to Target if you're looking for this or that. So, those are the two things that I would focus on.

Sky Canaves:

Yeah. I think one thing that retailers with a store presence don't do enough of is leveraging that space to create experiences, and make this Prime Day shopping season more than an online sales event, and I don't think we need to bring back the days of Black Friday doorbusters, but something more appealing. Maybe it's product demos, or gifts with purchase, or sampling, even entertainment, something that will bring people to stores, and that can also help unlock or differentiate the value of their loyalty programs and membership programs.

Suzy Davidkhanian:

I love that, because you can't necessarily compete with Amazon as far as convenience goes, or the breadth of products that are available, so find what makes you unique and lean into that.

Sky Canaves:

Yeah. But you do have to have something at the same time because about half of shoppers are going in comparison shopping off of Amazon. So, the traffic is going to be there. So, if they don't find something on sale, they're just going to go back to where they started.

Suzy Davidkhanian:

Correct. That's the Black Friday in July that you were talking, referencing. It is a must, everybody's got to figure out how to compete, but compete knowing your own strengths. So, as we think about the holidays... Because we always talk about Prime Day kicking off the holiday, at least the spirit of the holidays. Based on what we learned from this Prime Day, what's one thing retailers should be paying more attention to that you don't think people are talking enough about leading into the holidays? Sky?

Sky Canaves:

I think one is a potential shift in the calendar again, because now with an earlier Prime Day into June, in Q2, there's a little more breathing room, a little more time before we get to the fall sales event, which Amazon has had this October Prime member sale that changes its name often, I think last year it was Big Deal Days, maybe that could move up earlier into late September, or very beginning of October, and be more focused around these really strong performing categories, like grocery, essentials, beauty and personal care, rather than being positioned as an early kickoff to the holiday shopping season.

And that would also create more of a gap with the Black Friday/Cyber Monday period, which for Amazon is now the Turkey 12 because it kicks off a full week before Thanksgiving. So, rethinking the calendar and the importance of building awareness earlier so that consumers will see you when the big sales events happen.

Suzy Davidkhanian:

Zack?

Zak Stambor:

Yeah. To get back to the point I said at the start of this episode, of consumers are getting hard to please, I think you have to find ways to make your discounts or your offers appealing to consumers who are very focused on value. And you don't need to perhaps just have 50% off everything, but you could find some creative ways to create bundles or different types of offers that might appeal to consumers and convince them to spend.

Suzy Davidkhanian:

Cool. I'm going to throw one in too, you guys. I think that with all of the AI tools that we now have, retailers are able to see what I'm looking at as a shopper. They can see a lot of my intentions before I pull the trigger on the purchase. And if Amazon Prime showed us one thing, it's that people are spending more on things that they planned versus impulse, and so I think there's probably a way to understand all the signals and use all the AI tools that are available to try and target those items, personalize the offers that are more compelling. Kind of like what you both said, but just with this idea of intention. We could definitely keep going on and on, there's so much to say, but that's where we're going to leave it for today. Thank you, Sky.

Sky Canaves:

Thanks, Suzy.

Suzy Davidkhanian:

Thanks, Zak.

Zak Stambor:

Yeah, thanks for having me.

Suzy Davidkhanian:

And thanks to our listeners and to our team that edits the podcast, please leave a rating or review and remember to subscribe. I'll see you for more Reimagining Retail next Wednesday, and on Friday, join Marcus for another episode of Behind the Numbers, an EMARKETER podcast made possible by Rokt.