Amazon Prime Day doesn’t matter. Just ask the company
Prime Day wasn’t mentioned once in Amazon’s earnings report last year for the quarter that included the fake July shopping day
I am giving you permission: You can safely ignore Amazon’s Prime Day, the annual fake shopping holiday Jeff Bezos invented two years ago.
True to form, Amazon released a crush of mostly useless statistics about the “success” of its invented holiday. Prime Day 2017 was the “biggest global shopping event in Amazon history”. Prime Day couldn’t even be contained by the boundaries of a single Earth day; it was 30 hours. The event “grew by more than 60%” compared with the same 30-hour stretch in 2016. What exactly does it mean that an “event” grew by more than 60% from the same fake event last year? Is that number of items available or sold? Revenue? Amazon doesn’t say.
The company said “tens of millions of Prime members” bought something on Prime Day. Is this much more than the number of Prime members who buy something from Amazon on a typical day? Amazon does not say that, either.
No matter what Amazon.com Inc. boasts about its invented holiday, the company has already told you that Prime Day doesn’t matter.
If Prime Day were an important financial event for Amazon—and not merely relevant for vanity metrics —then the company would have to tell investors. Instead, Prime Day wasn’t mentioned once in Amazon’s earnings report last year for the quarter that included the fake July shopping day. Prime Day also wasn’t mentioned in Amazon’s securities filing that by law is supposed to include all relevant information about the company’s business. Also, there were no mentions of the inaugural 2015 Prime Day in Amazon’s securities filing or earnings report that year.
On a conference call a year ago, analysts pressed Amazon’s chief financial officer on whether Prime Day significantly increased sales or the number of new members to the company’s Prime shopping club. He merely repeated Amazon’s talking points about how awesome Prime Day was for the company and its money-saving customers.
In a similar conference call with analysts in 2015, the head of investor relations demurred when he was asked specifically whether Prime Day boosted Amazon’s 26% growth in the number of items sold that quarter. The company “certainly saw some additional units as a result of Prime Day,” the Amazon executive answered. I’m not bowled over by the enthusiasm.
Even a nonmaterial event for Amazon may still be a whole lot of money. J.P. Morgan estimated Wednesday that Prime Day represented roughly $1 billion in revenue for Amazon. For context, $1 billion would be 2.5% of analysts’ average estimate for Amazon’s revenue for the quarter ending 30 September.
Using the average Wall Street estimate for Amazon’s third-quarter revenue, each day generates on average $444 million in revenue. That means Prime Day is most likely a significant boost to a typical sales day, but it’s also impossible for outsiders to know whether Amazon is merely shifting the timing of revenue it would have generated otherwise. No doubt some people bought an Echo speaker on Tuesday instead of buying one a week earlier or later.
The reality is at the scale of Amazon and its $143 billion in revenue over the last year, no single day is crucial—even a fake day of importance during the typically slow summer. And if Amazon wanted to be real with investors, it could mirror China’s e-commerce king Alibaba, whose own “Singles’ Day” is similar to Prime Day. Alibaba discloses the total value of merchandise sold on its fake shopping holiday. This isn’t an ideal metric either, but it’s more useful than Amazon’s disclosure that Americans bought more than 200,000 lightbulbs on Prime Day.
All that said, Amazon’s invented shopping holiday is a master stroke. The company generated oodles of free publicity. No doubt it lured more people to its all-important Prime club. It put a lot more Amazon gadgets into people’s homes, although it likely lost money on each device to do so. And based on my scanning of Prime Day deals, Amazon persuaded a good number of large companies like Lysol owner Reckitt Benckiser to pay Amazon for ads to promote their Prime Day offers.
The genius of Amazon is its ability to persuade people to turn to the company first for all their shopping needs, and Prime Day reinforces that habit. But we don’t need the smoke and mirrors about how Prime Day was a success as long as people don’t ask any follow-up questions about what “success” means. Amazon is worthy of hype without injecting fake hype. Bloomberg Gadfly
Editor's Picks »
- Fund managers slashing allocations to equities in emerging markets, shows BAML survey
- ICICI Lombard tightens grip on profitability in a lean growth quarter
- TCNS Clothing IPO: Valuations capture the upsides adequately
- Nightmare of Indian Accounting Standard 115 comes to haunt firms in the real estate sector
- What is driving the optimism in stocks of paint companies?