Amazon Prime Day starts at 12pm PT and will run for a full day and a half. During that time, Amazon will implement the simple and ingenious psychological shopper tactics that retailers have used for ages.
But given the massive amounts of Prime Day shoppers and widespread success of the annual sale (roughly a 70% penetration rate), one question is on virtually every other retailer’s mind: what can we do to compete while using our own agility?
First off, retailers should not try to beat Amazon at its own game. It’s best to avoid holding flash sales during the month of July, when Prime Day hype is highest, to avoid getting lost in the mix. Furthermore, retailers shouldn’t discount the same types of items Amazon is promoting, as the market will already be saturated.
Retailers should pay attention to traditional tricks of the trade and incorporate them into a flash-sale technique. At the heart of Prime Day is the same traditional marketing technique seen on Black Friday – the retailer offers a limited amount of a product at a great discount to create the psychological frenzy of “need to buy, now.” For example, a pair of earbuds that normally retails at $299 are now $99 – but only from 3-4 pm!
When planning the flash sale, retailers should pay attention to the following:
- Timing – This can be done on nearly any day of the year, but an especially good time to react to Prime Day is in August or September. This way you can take advantage of back-to-school season through “Early Thanksgiving” promos.
- Analyze inventory – It’s important to remember that the need for flash sales, whether on Prime Day, Black Friday or another date, while necessary for all retailers, most often is the result of some planning failure if not a loss leader, or other promotional strategies. Analyzing inventory and paying attention to data indicating demand trends can help reduce excess merchandise that will eventually need to be liquidated. However, even with better data analytics and planning, every retailer will have some amount of end-of-season merchandise that needs to be sold. By leveraging data, retailers can ensure they have good visibility into their inventory and are better able to appropriately plan flash sales for those items.
- Get them into the store – Deals should be offered online and in-store at equal prices, but retailers need to figure out ways to get customers into the store. Options like buy online/ pick-up in store, even buy online “reserve” at store, and buy online/ return in-store are gold because they get the customer to interact with the brand and products, leading to a greater purchase potential. The better the in-store shopping experience, for example having specialists at Eastern Mountain Sports who help you test and select camping gear, will highlight your company culture and sell more than a website. Retailers considering an early-August flash sale should promote pick up in-store, so their customers can potentially get their merchandise at the same time or earlier than Prime Day shoppers, for lower prices.
- Ship for Free – While the in-store experience remains a good thing for sales, having a great online experience is equally as important. A way to ensure that is by joining Amazon in offering free shipping. Customers expect it, and it can be done at a reasonable cost to the retailer. If possible, offer it globally, like Amazon is trying to. As renowned Behavioral Economist Dan Ariely highlights in The Nuances of the FREE! Experiment, “FREE! is indeed a very powerful force.”
- Competitive-yet-tactful discounting – Retailers need to move merchandise, but they have to do it with at least some profit. There’s an important lesson to be learned from a retailer like Circuit City. They discounted plasma TVs at ~$100 lower than their break-even point with the hope they could get customers into the store, where they would (theoretically) buy additional accessories to make up the difference. Unfortunately that didn’t pan out. The TVs sold, but customers didn’t end up buying any extras and the (now-defunct) Circuit City was left with a deficit.
- Plan for success – At the same token, retailers should anticipate what major success looks like for the organization. What are the next steps if the flash sale is working better than anticipated, just like Build-a-Bear promotion of “pay your age” campaign. Prepare an inventory response with agility, so you do not end up annoying your most loyal customers.
Ultimately, what Prime Day teaches us is that retailers can have significant success at moving merchandise through flash sales by using traditional techniques, but with the addition of modern planning and fulfillment options. It will be the retailers who pay close attention to their data, merchandise and loyal shopper trends & needs, while staying close to brand values, that will perform the best and continue to stay competitive with Amazon.