Shoppers Drive Record Spending on Amazon’s Prime Day
Launched in 2015, Prime Day is Amazon’s signature event used to entice online shoppers with significant online discounts and promotions. In 2017, Amazon extended Prime Day to two days. As the world’s largest online retailer, Amazon posted global sales revenue of $575 billion last year.
Over the years, the broader retailer industry has used Prime Day as a vehicle to launch their own online promotions to attract consumer dollars. The event has often been called “Christmas in July” due to the frenzy of deals retailers offer to prospective shoppers.
This year, Prime Day’s two-day shopping blitz was held last Tuesday and Wednesday. According to Adobe Analytics, U.S. retailers tallied a record-high $14.2 billion in online sales during these 48 hours. This is up 11.8% from last year.
Adobe Analytics reports retailers offered much steeper discounts this year, ranging between 9%-22% off the regular listed price. The biggest discounts were on electronics, which were expected to peak at 22%, compared to 14% last year. Other categories seeing big discounts were apparel (20%), home/furnishings (17%), toys (15%) and televisions (14%).
Another key trend for this year’s Prime Day was the use of Buy Now Pay Later (BNPL) services. BNPL is a short-term financing option that allows consumers to make point-of-sale installment loans for purchases. For example, payment provider Affirm partners with major retailers such as Amazon, Walmart and Target to provide consumers a BNPL option. Klarna, PayPal, Apple Pay Later and Afterpay are other popular BNPL providers. Some BNPL providers offer lower- or no-interest financing.
BNPL allows consumers to avoid putting purchases on high interest credit cards. According to LendingTree, the average interest rate on new credit cards is 24.84%. Adobe Analytics expects BNPL purchases during last week’s Prime Day to reach $1.1 billion. The use of BNPL in recent years has soared. Insider Intelligence reports that U.S. consumers are expected to purchase $80.77 billion in goods and services using BNPL in 2024. This is 12% higher than 2023 and a 113% increase from just three years ago in 2021.
Shopping for discounts and the growing use of BNPL reflects the challenges inflation-weary consumers have been facing. The U.S. Census Bureau just reported that retail sales in June remained unchanged from May. Over the past 12 months, retail sales among the nation’s retailers increased by 2.3%.
But the retail sales data is not adjusted for inflation. With the national inflation rate at 3%, adjusted for inflation, retail sales actually declined by 0.7% over the past year. In other words, though the total dollar-value of purchases rose by 2.3% over the past 12 months, consumers actually bought fewer goods and services.
In case you missed out on this year’s Prime Day event, there are still sales to be had. In fact, Prime Day has spawned a broader July shopping season as retailers look to capitalize on the mid-summer spending spree. The deals are still out there if you look for them. Happy shopping!
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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