Sofia Reguero INside Performance Marketing Mon, 10 Oct 2022 14:09:46 +0000 en-US hourly 1 https://wordpress.org/?v=6.1.4 Amazon Prime Day 2: This Time, It’s Personal https://performancein.com/news/2022/10/10/amazon-prime-day-2-this-time-its-personal/?utm_source=rss&utm_medium=rss&utm_campaign=amazon-prime-day-2-this-time-its-personal Mon, 10 Oct 2022 14:05:03 +0000 https://performancein.com/?p=69070 For brands, serving up big discounts for Prime Day isn't as easy as it sounds, for several reasons, including declining profit margins, supply chain issues and the shrinking disposable income of the average consumer. There is no single prescription for planning how to approach the event, but here, Sofia Reguero offers her top tips.

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Amazon Prime Day had its biggest event yet this summer, with members purchasing more than 300 million items and making savings of over $1.7bn over the two days. This is in line with the trajectory Prime Day has taken since the first time it took place in 2015, with Amazon scaling its summer sale to record-breaking heights every single year.

Now it’s official. Those who missed out in July will have a second shot at savings, with the retailer adding two additional Prime Days on the 11th and 12th October. Amazon has said that the additional days are a chance for consumers to get ahead of their Christmas shopping. And it’s a smart move. One that is very reactive to changes in the market and consumer behaviour.

Early holiday shopping or “holiday creep” is a growing trend. Gartner found that nearly half (48%) of consumers will start to shop in October or November this year, with 16% now shopping year-round for holiday gifts. But it’s fair to argue there is more to shifts in shopping habits than early festive cheer.

Surging energy prices and food costs weigh heavily on the economy. The cost of living crisis is affecting everyone, and as Amazon’s President told Reuters, this “macroeconomic environment” consumers are facing is further rationale behind the second Amazon Prime Day.

From the brand perspective, serving up big discounts for Prime Day isn’t as easy as it sounds for several reasons, including declining profit margins and supply chain issues. A survey of brands for the July event found that 22% planned to discount less than last year. There is no doubt that the extent to which inflation pressures shoppers will be weighing on the minds of brands this October as well.

It’s a lot to contend with, retail brands and marketers will need to think outside the box to balance the bottom line. Especially considering the intense competition for the shrinking disposable income of the average consumer. There is no single prescription for planning how to approach the event. Still, depending on where their challenges fall, there is much to consider around margins and inventory when capitalising on Amazon Prime Day 2.

It’s all about the margins

The problem in 2021 was getting inventory into warehouses, but understandably, it’s all about the margins this year. While all brands should conduct an extensive study on product margins and pricing, those with tighter margins – due to either higher cost of raw materials or inflation – must know their pricing structure like the back of their hand.

Prime Day can feel like an opportunity to go in all guns blazing. However, a conservative approach to bargains offered is a much smarter option for brands with tighter margins. Discounting just one or a couple of products could be a way of minimising the margin squeeze.

Consumer choice is not a bad thing, but in the busiest sales periods, retailers mustn’t overwhelm their customers to the point of checkout paralysis. There’s no need to. Instead, focus on getting the right products in front of the right people. With this in mind, choosing which products to discount should be based on a data-driven approach. Analyse your historical sales – which products are the best sellers? Where do you have an inventory surplus?

Bring to life dead inventory

For some brands, lack of inventory is still very much not the problem due to a slowdown in E-commerce sales last year and the ongoing supply chain issues. While historically, sellers have viewed Prime Days as a sale to jump-start new products, for many, this will be a “clear the excess” type of sale. As such, this is a huge opportunity to take advantage of the ability to apply deeper discounts for the readily-engaged consumer. But, before deciding on a promotional strategy, brands must understand their stock levels across their portfolio. This is crucial because promoting such products might not stand out if other best-selling products are discounted.

The percentage discount is obviously pivotal in every Prime Day sale – consumers will not be incentivised to buy if the deal isn’t appealing enough. Amazon instructs a minimum discount of 20% off. This is why with those struggling with profit margins, pouring promotional efforts into one or two products, as mentioned, will be more effective than a full portfolio approach. Whereas in the case of inventory, brands will need to either be selective and only discount products with high inventory levels or have a more aggressive discount on those products.

How to tackle advertising spend to maximise Amazon’s potential

It might sound like a lot of homework. But a study on Return On Ad Spend (ROAS) for advertising campaigns and a set target to work towards on Amazon Marketing Services (AMS) will benefit all brands. For those with excess inventory, it would be wise to delve even deeper, expanding on analysis and having a target ROAS by-product depending on stock levels. This will enable advertisers to understand how aggressive they can be with their strategy, identifying different paths to maximise sales while still making sense compared to the cost of the product and/ or holding inventory.

Mastering margins and inventory, as well as your advertising investment in relation to each respective challenge, is absolutely worth it. Only those who understand how their business is affected by internal and external barriers will be able to remain efficient. But, the benefits for successful brands are vast – this October and further afield.

Prime Days, or indeed any event that offers a good bargain – are the perfect time to attract and engage new customers. But Amazon specifically provides a really good shot at future customer acquisition. For example, three out of four customers use Amazon to discover new products.

But for that to matter, planning must consider how to successfully entice those customers outside of these branded discount days and understand that while conversions happen on Amazon, they are driven by many media channels. An omnichannel approach that includes video and image content will maximise outcomes for Prime Day and beyond.

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