The annual July sales bonanza known as Amazon Prime Day or Walmart’s five-day Rollback have concluded. While it’s unclear how much these discount events really help the bottom line, the players each tout the sales efforts as “successful.”
Some believe that simply means the retailers have discarded inventory overages primarily in electronics, housewares and apparel ahead of this year’s holiday season. But other analysts see the real value of these member-only shopping events as helping to drive loyalty and higher membership numbers for their free delivery services.
Amazon set the bar high for other retailers to follow with its Prime membership. The $99 annual membership that offers 2-day free shipping as well as video and other media downloads has already been purchased by an estimated 63 million U.S. consumers, according to the Consumer Intelligence Research Partners. Not only is Prime a popular membership, more than 76% of those who take advantage of the 30-day free trial will convert to paid memberships as the holiday season approaches.
Analysts agree that when consumers are paying nearly $100 a year they will use that service more than those who are not Prime members because they want to feel they are getting their money’s worth.
“Consumers overwhelmingly prefer free shipping. That does not mean that they will always demand it. We understand that sometimes we need to pay for shipping. The trouble for competitors is that Amazon offers free shipping most of the time, and fast,” said Annibal Sodero, assistant professor of Supply Chain Management at the University of Arkansas.
SHIPPING PASS EVOLUTION
Walmart’s answer to Prime is Shipping Pass, a subscription-based service that provides 2-day free shipping on Walmart.com orders for an annual cost of $49. The retailer is testing the service and admits it changed the terms over the past year. The company said the newer terms are better for the customer and have been made possible by Walmart’s improvements in the supply chain with more e-commerce dedicated fulfillment centers.
“We continue to test this service and make improvements since Shipping Pass was first introduced in May 2015. The service started out at $50, and provided for 3-day free home delivery. With more stores now equipped to fill orders and the new e-commerce fulfillment centers we were able to shave a day and slightly reduce the cost,” said Ravi Jariwala, spokesman for Walmart.com.
Without specifics, Jariwala said the sign-ups for Shipping Pass quadrupled since the retailer announced the free 30-day trial that preceded its 5-day rollback event which ran from July 11-15. He did not share how many subscriptions have been purchased to date. With more than 4.500 physical stores where consumers can pickup online orders, it remains to be seen how many of the retailer’s 140 million U.S. weekly customers will find it necessary to subscribe to Shipping Pass, even though it’s half the cost of Amazon Prime.
Sodero advised retailers to set the price and delivery terms for their services like Shipping Pass and subscriptions and stick to them. He said customers like consistency. Having delivery free some of the time or on some products is not a good idea, because consumers are confident they can get it with Amazon Prime day and day out.
For example during the holiday season of 2014, Walmart offered free shipping for the top 100 items selling on Walmart.com, waiving the $50 minimum purchase requirement. Then in 2015 the retail giant did not offer free shipping, but rather held to the $50 minimum purchase requirement. Walmart claimed consumers favor pickup options in the store and as the company focused on the lowest overall prices of goods and not giving away free shipping perks.
PRIME DAY TRAFFIC
According to Hitwise, a division of Connexity, Amazon.com registered 81.6 million U.S. visits on July 12 – the Prime Day. Hitwise said number of visits to the website fell about 6% below the 86.4 million visits it estimated the e-tail giant received on the first Amazon Prime Day held July 15, 2015. This indicates that Walmart and other retailers cut into some of the Amazon traffic.
While total visits to Amazon was slightly lower year-over-year, the online retailer still claimed the day a success with worldwide sales on the one day event rising 60% over a year ago. U.S. sales were up 50%, Amazon said. While Amazon won’t say exactly what the single day tally was, analysts expected sales to approach $1 billion for the day.
Walmart, which began offering free 30-day memberships to its competing Shipping Pass service in the lead-up to this year’s Prime Day, saw visits to its e-commerce site on July 12 increase 21% from the same date a week earlier, according to Hitwise.
Analysts largely believe the July sales events don’t rmove the needle for the company’s overall, but they are a way to help retailers attract more eyeballs to their websites and grow their paid memberships subscriptions – a revenue stream of its own.