Prime Day 2022: What to Expect

Prime Day 2022 is less than two weeks away, and most brands are busy finalizing their strategy to grow sales and improve profitability. As we head into this key sales event, it is important to remember the last several Prime Days have all occurred under exceptional circumstances. Prime Day 2020 (October 13-14) had to contend with lockdowns, supply chain-driven shortages, and a surge in ecommerce spending. Prime Day 2021 (June 21-22) brought new waves of inventory challenges and retail media growth. 2022 will be no less unique, especially since rumors are swirling that a second Prime Day event could occur in October this year.

What should brands know about Prime Day? To answer this question, we will look back at different performance metrics for both Prime Day 2020 and 2021 with a focus on category data in 2021 to see what insights can be gleaned that apply to 2022. All data is taken from CommerceIQ customers on Amazon in aggregate.

 

State of the Supply Chain

Many of the out-of-stock (OOS) challenges experienced in 2020 were resolved by 2021. Revenue lost due to OOS spiked for Prime Day in 2021, but not nearly as much as the year before. Looking at revenue lost due to OOS in 2021 by category shows that the brunt of the loss came from Patio, Lawn, & Garden, though Beauty, Home & Kitchen, and Office also saw spikes. Tools & Home Improvement saw spikes close to Prime Day but not during the event itself. 

Figure 1: Out of Stocks Improved Drastically Between 2020 and 2021 Prime Days

Index set to 100 for 15 days before Prime Day

Figure 2: Patio, Lawn, & Garden Bears the Brunt of OOS on Prime Day 2021

Index set to 100 for 15 days before Prime Day

However, there has been an exceptionally large surge in both revenues lost due to OOS and RepOOS% this year starting in May. This surge is significantly higher than what occurred in May 2021 in advance of a busy summer selling season. The war in Ukraine and lockdowns in Shanghai are again threatening global supply chains in time for Prime Day.

Figure 3: Out of Stocks Spike in May 2022 for Both Units and Revenue Lost

Revenue lost due to OOS index set to 100 for May 2021 to create simpler comparisons for May 2022

Brands should be prepared for the scenario that they must deal with high OOS. Have substitutions and different variations ready if some favorites are no longer available. In a retail media-driven environment like Prime Day, linking inventory levels to the flow of ad spend can help prevent OOS situations before they occur and give brands incremental dollars that directly improve their profitability.

 

The Prime Day Revenue Lift

The average brand’s Prime Day sales lift has declined since 2020. Between 2020 and 2021, a brand’s average sales lift fell from 3x to 2.5x compared to a regular day of sales two weeks prior for each year. However, absolute sales were buoyed in 2021 as Amazon’s everyday revenue levels rose significantly year-over-year as a baseline point of comparison between the two years.

With ecommerce sales growth in 2022 lagging its historical rates according to government figures, Prime Day sales could be particularly challenged this year both in relative terms to other days and also in absolute dollar volume. As they draw down on their savings, shoppers are shifting away from big-ticket, discretionary spending and towards experiences and essentials. They are also shopping more in-store and are becoming more sensitive to rising prices that could further limit spend. Rising costs and lower margins also mean that brands will likely prioritize profitability over revenue growth this year.

Figure 4: Rising Costs and Lower Margins Heading Into Prime Day 2022

Price level index set to 100 for May 2021 to create simpler comparisons for May 2022

Despite its challenges, Prime Day is still a premier sales event for Amazon. Last year, Ordered Product Sales (OPS) rose to 2.5x their normal levels across the two days. Many first-party brands within the durable goods categories can still typically expect a sales lift of at least 2x across the two days. Glance views also tend to rise 2x to 3x across the period, suggesting that if products are visible, they can sell so long as conversion rates are maintained. 

Figure 5: OPS Lift not as High Compared to Surrounding Days in 2021 vs. 2020

Index set to 100 for 15 days before Prime Day

Figure 6: Glance Views on Prime Day are Triple Normal Level

Index set to 100 for 15 days before Prime Day

In 2021, there was a clear hierarchy of categories for OPS sales lift. Home & Kitchen performed extremely well. Even grocery received a lift. Note that our data does not cover electronics extensively.

Category OPS lift for 2021*

• Home & Kitchen: +534%
• Patio, Lawn, & Garden: +226%
• Beauty: +119%
• Office Products:* +95% (vs. comparable weekday sales 14 days prior)
• Tools & Home Improvement: +80%
• Health & Personal Care: +79%
• Pet: +66%
• Grocery: +37%

*Compared against 15 days before Prime Day, excluding office products category

Figure 7: Durable Goods See Large OPS Increase

Index set to 100 for 15 days before Prime Day

Most categories benefit from Prime Day, especially hard goods. Glance views mirror this ranking, though the lift in hard goods isn’t quite as astronomic, suggesting that there’s an opportunity for durable goods brands to boost their conversion even more than other categories if their content and relevance are on point.

Figure 8: Home & Kitchen Glance Views Benefit Disproportionately

Index set to 100 for 15 days before Prime Day

One important callout: according to our data, shopper purchasing does not rise meaningfully in the days before Prime Day. Instead, they waited until Prime Day itself. Do not overleverage discounts or media spend in advance of Prime Day with the expectation that it will drive immediate conversion.

 

Deals No More?

Prime Day is not a holiday like other key seasonal selling periods. Across non-electronics categories for 1P brands on Amazon, discount levels for those items that are on sale do not rise by any significant amount vs an average day, which is around 30%. 

Figure 9: Discount Levels for On-Sale Items do not Increase for Prime Day

Index set to 100 for 15 days before Prime Day

When this data is broken out by category, we can see that only Home & Kitchen sees an increase in discounts for Prime Day, especially Day 2 where average discounts can reach 60%. However, even here, discount levels are later eclipsed in the days preceding Independence Day. For tools and Home Improvement and office product categories, discount levels are lower on Prime Day than they are on the surrounding days.

Figure 10: Only Home & Kitchen Sees Increase in Discounting

By examining the surrounding two weeks from Prime Day 2021 (June 21-22), we also capture data for Independence day. Brands engage in significant discounting activity with discount levels rising from a baseline of 30% up to 50% on the day itself (July 4 occurs on +12 along the horizontal axis). In short, average discount levels for on-sale items rise for July 4, but not for Prime Day. For another point of comparison, Cyber5 2021 saw discount levels rise between 5% and 20% depending on the day averaged across categories. Brands have largely abandoned discounting as a tool to drive conversion en masse for Prime Day. Given how margins are even more pressured this year, expect this shift away from discounting to continue.

 

Rise of Retail Media

Instead of discounts, brands are turning to ad spend as their go-to Prime Day strategy. Between 2020 to 2021, ad spend lift doubled for Prime Day. Last year, ad spend on Prime Day was 4x what it was just two weeks before. For Cyber5 2021, ad spend increased only 3x for most days. Many brands opted to start the period by increasing ad spend 20-40% one week before Prime Day. As our OPS analysis shows, this initial increase in ad spend before Prime Day might not drive immediate conversion, but it may serve as middle-of-the-funnel marketing activity that can ‘prime’ the shopper to buy a brand’s products on Prime Day itself.

Figure 11: Ad Spend during Prime Day Soared in 2022

Index set to 100 for 15 days before Prime Day

Ad spend increases have some clear splits by category.

Category Ad Spend lift for 2021*

• Home & Kitchen: +1181%
• Tools & Home Improvement: +638%
• Patio, Lawn, & Garden: +437%
• Beauty: +249%
• Health & Personal Care: +172%
• Pet: +153%
• Office Products: +34%
• Grocery: -51%

*Compared against 15 days before Prime Day

Figure 12: Ad Spend Surge by Category Mirrors OPS

Index set to 100 for 15 days before Prime Day

The categories ranked by surge in ad spend align with their surge in OPS. In general, the surge in ad spend must be much higher than a brand’s targeted ordered product sales surge if it wishes to achieve its goals. Grocery and office are exceptions to this trend. Grocery was the only category tracked to see a decline in ad spend for the period. Grocery also saw the smallest corresponding sales surge.

Cost-per-clicks (CPC) also rise on Prime Day, but CommerceIQ customers can mostly maintain their normal and highly positive levels of ROAS despite hugely higher levels of ad spend. That being said, CPCs around Prime Day declined from 2020 to 2021, with 2021 seeing a smaller CPC surge for Prime Day itself when compared to 2020.

Figure 13: CPCs Declined for 2021 Prime Day Versus Prior Year

Here’s how much each category’s CPCs surged (or didn’t) for Prime Day 2021*

• Home & Kitchen: +122%
• Patio, Lawn, & Garden: +88%
• Tools & Home Improvement: +62%
• Beauty: +49%
• Office Products: +37%
• Health & Personal Care: +29%
• Pet: -14%
• Grocery: -22%

*Index compared against 3 day average two weeks before Prime Day

Figure 14: CPCs Rise for Prime Day

Home & Kitchen and Patio, Lawn & Garden had the most CPC inflation though these categories also saw the biggest OPS increase.

Turning to ROAS, some categories were able to make much more efficient use of their ad spend than others. In 2021, Patio, Lawn, & Garden saw a large spike for Prime Day while Office brands succeeded in driving a spike before Prime Day. If revenue growth slows this year, expect ROAS to also be challenged in 2022.

Figure 15: ROAS Soars but Differs by Category 

Brands have realized that for the uniquely online phenomenon of Prime Day, driving sales is achieved with brand visibility rather than deals. If a product can be relevant and easily found near the top of the page for key search terms, it will convert much faster. Initial discounts on a few items could still be used to drive traffic, but baskets are built on items that are visible even if they are not discounted. Some of this activity may be a carryover from the days of the pandemic when discounting levels received a hit from which they have never fully recovered. As we see ad spend soar this year, expect more of the same for Prime Day 2022.

Figure 16: Ad Spend Soars Year-Over-Year in 2022 as ROAS Stays Steady

Ad spend index set to 100 for May 2021 to create simpler comparisons for May 2022

Keyword Spotlight

Figure 17: Top Ranked Keywords for Prime Day 2021

Keywords about electronics, fitness, crafts, beauty, cleaning, and some grocery items dominated search lists last year during Prime Day. Since shopper trends have shifted so much from year to year ever since 2020, do not expect top items in 2021 to be replicated this year by default. Instead, expect to see some of the same discretionary categories but with more focus on personal care and essentials. Apparel items may be less common.

 

Key Takeaways

 

CommerceIQ’s predictions for Prime Day 2022

• The average sales lift for Prime Day 2022 will be less than 2021
• Discounts, similar to 2021, will not register significantly
• Shoppers will shift some purchasing to personal care and essentials though discretionary goods will remain popular
• Out of stocks will rise from the prior year, but not to 2020 levels
• Ad spend increase will be higher than in 2021, but ROAS could be challenged if shoppers decide to spend less

 

CommerceIQ’s brand guidelines for Prime Day 2022

• Link ad spend to inventory levels to avoid out of stocks
• Leverage discounts to drive initial traffic, but use sponsored products and recommendations to create bigger baskets
• Invest more in ad spend and optimize your hourly bidding to yield especially high returns
• Maintain high conversion rates to make use of high visibility
• Do not overinvest in either discounts or ad spend ahead of Prime Day to drive sales

 

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