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PA IN THE MEDIA

Amazon Prime Day deals expected to disappoint amid cost crunch

Shanton Wilcox, US manufacturing lead at PA Consulting, discusses Amazon Prime Day.

Click here to read the full Bloomberg article 

The article notes that the deals during Amazon.com Inc.’s annual Prime Day sale will be stingier this year, according to merchants, thanks to rising shipping costs, higher advertising rates and scarce inventory.

The two-day event, which begins Monday, arrives as the world grapples with the lingering effects of the pandemic. Supply-chain disruptions -- including the Suez Canal shutdown earlier this year and a spike in Covid cases that has hobbled two of China’s busiest ports -- have pushed up costs and made Amazon suppliers wary of selling too much during a profit-crushing sale. Many say they’re also holding back inventory in case shipping delays persist through the busy Christmas holiday shopping season.

Amazon merchants, who account for 60% of sales on the website, are betting cash-rich consumers will overlook the more meager bargains and still swarm Prime Day. Online spending in the U.S. will hit an estimated $12.2 billion during the sale, with Amazon capturing 60%, according to EMarketer Inc. (Last year spending was $10.4 billion, but the pandemic pushed the sale back to October, making comparisons difficult.) As always, competing retailers are looking to surf the Prime Day wave. Walmart Inc.’s “Deals for Days” and Target Corp.‘s “Deal Days” both began Sunday.

Amazon started Prime Day in 2015 to attract new subscribers who now pay as much as $119 a year for shipping discounts, video streaming and other perks. The event helps Amazon lock in shoppers before the holidays and deepen its relationship with existing customers by offering them deals on Amazon gadgets such as the Fire TV stick and smart speakers that run on the Alexa voice platform. Amazon brands will once again take center stage, with deals on surveillance doorbells from the company’s Ring division and a voice-activated Echo device for cars that will go for $15.

Shanton says that Amazon, which has posted record profits this year, can afford to discount heavily. Many consumer-products companies don’t have that luxury and are thinking about raising prices as much as 10% this year, making it tough to participate in a big sale. 

“Prime Day is going to be less exciting than it has been in the past,” he said. “You don’t want to scare away demand, but you have to manage profitability.”

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