Amazon Prime Day, which celebrated the 20th anniversary of the Prime members’ program on July 15, 2015, has taken a lot of flack as a bad customer experience, based on negative tweets and members’ frustration about the quality, availability, and accessibility of the items featured in the sale.
Prime Day Spoof posted on Reddit by Blue Mosquito
However, we suspect that the first annual “Prime Day” yielded the two major results that Amazon intended. It attracted many new Prime members. It gave Amazon and its retail partners an opportunity to stress test its infrastructure before the 2015 holiday season.
Boosted the number of Prime members
The mid-summer Prime members-only sale served to boost trial Prime memberships during an otherwise quiet retail period. Amazon reported that it added “hundreds of thousands” of new Prime Trial members to its current base of Prime users worldwide. We assume that at least 70% of these trial users will probably convert to becoming loyal, repeat Prime members, based on previous analysis. (Consumer Intelligence Research Partners stated in early 2015, commenting on the estimated 3 million new Prime users Amazon gained over the 2014 holiday season, that “the average number of members who pay after the 30-day trial stands at roughly 70 percent.”)
How many Prime Users are there?
The estimates for the number of Prime members globally range from 50 to 60 million. Amazon does not divulge the number of its Amazon Prime members; that official number remains elusive.
Business Insider's estimates of the number of Amazon Prime members as of December 2014 is about 53 million.
Just before Prime Day, according to Tricia Duryee at Geekwire, Consumer Intelligence Research Partners released another report in which they asserted that Amazon had 44 million Prime members in the U.S. alone:
“Consumer Intelligence Research Partners estimates that Amazon now has 44 million Prime members in the U.S., who spend an average of $1,200 a year, compared to about $700 a year for non-members.”…
CIRP put the total number of Amazon Prime users at 43 million before Prime Day. Note the second quarter increase in year over year domestic growth. These estimates do not include the "several hundred thousand" new Prime Trial members acquired on Prime Day.
Jeff Bezos doesn’t confirm or deny any of these speculations. Amazon’s official press releases continue to say that Amazon currently has “tens of millions” of Prime members. It’s also hard to discern these numbers from Amazon’s published financials because of the accounting treatment that Amazon uses:
“Amazon Prime membership fees are allocated between product sales and service sales and amortized over the life of the membership, according to the estimated delivery of services."
The mid-July boost in $99/year Prime memberships by featuring a “members-only” sale and encouraging trial membership is a good strategy. However, due to the way it was structured--around Flash Deals--Prime Day attracted primarily bargain hunters rather than long-time, loyal customers.
We believe that one of the main reasons for Prime Day (aside from celebrating the 20th anniversary of the Prime program), was e-commerce stress testing. “Prime Day” created a large sales event in mid-summer which gave the Amazon infrastructure teams a chance to test out many of their processes early enough to fix glitches before the big year-end holiday spike. Amazon promoted it as a day to “find more deals than Black Friday, exclusively for Prime members.” The volumes were huge:
“Customers ordered 34.4 million items across Prime-eligible countries, breaking all Black Friday records. Greg Greeley, Vice President, Amazon Prime, said: ‘Customers worldwide ordered an astonishing 398 items per second …. Worldwide order growth increased 266% over the same day last year and 18% more than Black Friday 2014.”
Fulfillment by Amazon
The other infrastructure Amazon was stress testing was its “Fullfillment by Amazon (FBA)” service.
Prime Day gave retailers an ability to test out Amazon’s fulfillment chops before the make or break holiday season. Retailers have to nail down their e-commerce and fulfillment infrastructure by the end of July in order to be ready for the November/December retail holiday shopping season.