Friday Forecast: Amazon Prime Day Proves the Power of Scarcity

by Colleen Ferrier and Rick Petry on Jul 14, 2017 10:34:06 AM Consumer Behavior, Consumer Impression

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It was the day after Christmas when one of your Friday Forecasters started canvassing a table of Jim Shore holiday figurines that were priced at half-off in the cellar at Macy’s. No other shoppers were paying any attention whatsoever to the display until your faithful narrator started setting some boxes aside indicating purchase intent. Soon, like moths to a flame, the table was surrounded by like-minded individuals who engaged in a kind of feeding frenzy, jockeying amongst one another for the remaining spoils.

Sound familiar? Scarcity, that is the idea that something is in short supply or might not be available to us, is a powerful psychological driver that fuels action. Humans fundamentally fear and loathe the idea that they might “lose out.” Scarcity, along with a second equally compelling motivator – the desire for a bargain – is one of the two primary drivers of live home shopping. Over and over, two ideas are promoted: 1) that if the viewer does not act now, that the network pitching them will run out of stock; and 2) that the price of the offer being featured is only available for a limited time. In other words, your opportunity may perish if you don’t act now, perish the thought.

So, it was with rather bemusing irony that – in the wake of news that a merger between QVC and HSN would combine to create the third largest retailer behind Walmart and Amazon – that Amazon held one of its so-called ‘Prime Days’ earlier this week. Ironic, because such events are the e-tailing behemoth’s opportunity to leverage the same two aforementioned levers, much like a home shopping network. Prime membership, which costs $99 per year, includes unlimited, free two-day shipping and gives members access to original programming such as the acclaimed Transparent and Mozart in the Jungle, in addition to other benefits. According to a report from CNBC earlier this year, analysts estimate that Amazon has between 65 and 80 million Prime members worldwide. The estimate is based on a line item in its 2016 Annual Report that indicated it had generated $6.5 billion in revenue related to something called ‘retail subscription services’. On Prime Day, such members get access to special bargains for a limited window of time, creating the online equivalent of a Costco pop-up shop or QVC Today’s Special Value multiplied exponentially.

And shop they did. This past Wednesday’s Prime Day set a company record and was the biggest sales day in Amazon history. In a year-to-year comparison, Prime Day sales were up a whopping 60%, delivering numbers that even beat out the traditional holiday shopping extravaganzas known as Black Friday and Cyber Monday. Analysts estimate that one-day sales were between $500 and $600 million during the 30-hour event, which engaged a record number of Prime members. Dig a little bit deeper and you’ll discover that among the best-sellers were technology items calculated to sell you more items from, where else? Amazon. Leading the pack was the company’s Echo smart speaker with voice-activated Alexa capability that allows you to use voice commands to order more products from the e-tailer: products like Amazon Fire tablets and Kindle e-readers which also ranked among the top sellers. What can you say? Brilliant.

With the QVC/HSN merger combining everyday discount website-driven e-tailing with the kind of urgency that only a live shopping event can ignite, this new monster player will have to determine how to strike the right balance between the two kinds of direct-to-consumer selling, a conundrum Amazon is undoubtedly in the throes of figuring out. Such events as Prime Day are deemed ‘events’ by the very nature of their scarcity. Today’s savvy price shoppers have no impediments to determining whether or not a ‘deal’ is really a deal – or just a so-so offer wrapped up in the guise of a blowout sale. Like familiarity, ubiquity breeds contempt… or indifference at the least.

Alas, when we were young, none of these so-called sales event days were part of the cultural lexicon. Like the celebration of Cinco de Mayo, which was really concocted by the spirits industry to sell more tequila, or Valentine’s Day, a brainchild commonly attributed to a certain greeting card company, events devoted to hell-bent consumerism help break-up our humdrum lives and fuel our most basic instincts to hunt and gather. Just how many of them society will tolerate before the excitement wears thin remains to be seen. Will such occasions motivate consumers to shop ‘till they drop or will share prices drop as the gimmick grows stale? While a reliable crystal ball is a rare commodity, as the marketplace continues to consolidate, we don’t think the growth in direct-to-consumer sales is likely to be scarce at all. Mums the word.


 About the Authors

Colleen & Rick.jpgColleen Ferrier is a seasoned direct marketing expert who specializes in guiding integrated direct-to-consumer campaigns with an acute focus on ROI. Her broad experience has included management oversight of marketing, operations, media, and international distribution. The campaigns she has been instrumental in helping lead to success across her 15+ year career include Pillow Pets, Little Giant Ladder, Dream Lites, and Stompeez. Ferrier has a Bachelor of Arts in Communications from Augusta University, Georgia.

Rick Petry is a direct marketing veteran of over 25 years who has been involved with campaigns that have generated over $1 billion in sales. He provides creative services to both B2C and B2B marketing campaigns and recent projects have included Actegy/Revitive, Education Connection, GOLO, Joybird, and OYO/DoubleFlex. The author of over 200 articles on direct marketing best practices, Petry has a Bachelor of Arts in Cinema/Television from the University of Southern California and an MBA with a Concentration in Marketing and Sales from Marylhurst University.

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