By Amazon’s two-day Prime Event concluded on Wednesday, with shoppers taking advantage of discounts on food delivery, travel, and healthcare services. The event showcased the potential for growth in Amazon’s services sector, which has traditionally focused on goods. According to Adobe Analytics, Amazon’s 200 million U.S. Prime members spent a record $12.7 billion on merchandise, representing a year-over-year growth of 6.1%. While the sale of services and experiences may not have had a significant impact on Amazon’s bottom line thus far, the company is likely hoping for a change in the future.
Analyst David Klink from Huntington National Bank, which owns $160 million in Amazon stock, noted that Amazon is trying to move up the value chain and extract more value beyond being a pass-through for goods. Walmart is also making a similar move with its decision to offer various services like Paramount+ with its Walmart+ offering. As part of the Prime Day deals, shoppers received exclusive codes or discounts for hotel bookings with Priceline, restaurant delivery through Grubhub, and access to Amazon’s membership-based telehealth service, One Medical.
Klink stated that Amazon’s partnerships with Grubhub and Priceline are an extension of its existing advertising strategy. By collaborating with non-traditional partners, Amazon aims to make retail exciting again. Klink emphasized that if Amazon is where consumers are, brands like Grubhub and Priceline want to meet them there. Amazon’s partnership with Grubhub offers Prime members a free one-year subscription to Grubhub+’s food delivery service, while Priceline added an additional 20% discount to its Hotel Express deals.
Amazon also provided a 28% discount on a one-year subscription to its One Medical service for U.S. Prime members who signed up during the Prime Day event. The company announced that the first half of the sales event was the most successful in its history, attributing its success to the growth of independent sellers.
Although consumer spending slowed in the second quarter due to budget constraints, Amazon’s record-breaking sales during the event demonstrated its resilience. Andrew Lipsman, a principal analyst at market research firm Insider Intelligence, noted that as e-commerce growth slows, Amazon’s experimentation with more Prime Day deals on services and discounted memberships could strengthen its advertising services. Merchants and consumer products companies pay Amazon to promote their products on the site. In the first quarter, Amazon reported advertising revenue of $9.51 billion, a 20.7% increase year-over-year. Investors anticipate ad revenue to reach $11.2 billion in the third quarter, which will include data from Prime Day. The data collected through partnerships with companies like Grubhub and Priceline could help Amazon enhance its advertising offerings in those sectors, according to Lipsman.
Overall, Amazon’s Prime Event showcased the company’s focus on expanding its services sector, with an emphasis on attracting consumers through exclusive deals and partnerships, while also leveraging the data collected to bolster its advertising services.
