How Amazon uses Prime Day to build new channels

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Amazon's third annual Prime Day will likely share the immense success of its two first years, but Amazon's goal with this invented holiday isn't just about driving sales.

Prime Day is first and foremost a recruitment drive for Amazon Prime — the heavily discounted sale items are merely bait to make that happen — and for any new sales channel that Amazon is testing. Certain deals are explicitly tied to Amazon's Alexa voice assistant, and the company is also shining a spotlight on its mobile app.

The lead-up to Prime Day saw the introduction of several new devices that can accept payments for other Amazon products: the Echo Show, the Echo Look and the Amazon Dash Wand.

The Echo Show and Look are beefed up versions of its smart speaker, but the Dash Wand is more narrowly targeted. Reviving an old concept, the Dash Wand has a built-in magnet meant to adhere it to refrigerators, and can scan any food item's bar code to help restock the kitchen. It is sold for $20 with a $20 Amazon credit after setup — a pricing model reminiscent of the one Square used to build the mobile Point of Sale market.

Prime Day also gives Amazon a chance to highlight certain categories in its catalog, including those that pair well with its new focus on the kitchen.

While specific Prime Day offers are kept hidden before the event kicks off, Amazon has been more aggressive about grocery sales including 25% off items including ice cream and fresh fruit. This is a subtle way of driving awareness not just that Amazon is active in the grocery delivery business, but that items that are highly perishable are available in a reasonable time frame.

It’s a shrewd educational move, setting the stage for anything else Amazon has planned with its acquisition of Whole Foods. And anyone with a new Dash Wand has likely also begun a trial subscription to Amazon Fresh, lowering the barrier to Prime Day grocery shopping.

Doing more with mobile

As part of the drumbeat leading up to the signature event, Amazon has been offering daily prizes from June 28 through July 10 that ask shoppers to first view a short ad for the Amazon app, with explicit instructions on how set up alerts for upcoming deals advertised in the app.

The educational aspect of this promotion, which highlights specific app features, would appear to be an important acknowledgment that device ownership doesn’t necessarily correlate with device knowledge and use. This is further evidenced by Amazon's rumored development of an equivalent service to Best Buy’s “Geek Squad,” which would presumably act as not just a means of installation and setup of its technology in the home, but also as a means of providing in-person training on how to use Amazon’s services.

And some of the giveaways include mobile devices such as Apple's iPad and Amazon's Kindle Fire, emphasizing the digital nature of Amazon's deals.

A branding coup

Prime Day is by no means the first invented event devised purely to encourage retail spending. November is replete with holidays such as Black Friday and Cyber Monday, and Small Business Saturday originated as a marketing push from American Express in 2010.

In its third year, Prime Day may be cementing a specific time on the calendar for years to come. For all other retailers, this creates a conundrum: How do competitors like Walmart and Best Buy capitalize on the shopping frenzy taking place in early July, but not draw attention to Amazon’s creation?

The usual big box and apparel retailers are also running sales to coincide with Prime Day, but are conspicuously avoiding any mention of the e-tailer, treating its name the same way Harry Potter characters avoid naming the Dark Lord.

It's too tempting a retail opportunity to ignore entirely. In 2015, the first-ever Prime Day, Amazon exceeded 2014 Black Friday sales. In 2016, sales shot up a further 60% worldwide compared to the prior year's Prime Day. The invention of a new retail holiday in the middle of the year and a week or so after the Fourth of July has broadsided the entire retail industry, which previously calibrated the year around Black Friday.

Unlike Small Business Saturday, Prime Day is singularly a celebration of Amazon and therefore forbidden ground for competitors. Amazon’s signature event is therefore unlikely to become a “Hallmark Holiday,” but it will be hard for retailers to simply pretend that this event isn’t happening as it becomes an annual tradition.

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