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Prime Day Trends & Insights

What happened on Amazon Prime Day 2023?

Himanshu Jain General Manager / VP of Product

August 2, 2023

This year, Amazon achieved a remarkable milestone by creating its largest Prime Day ever. Alongside Miya Knights, co-author of Amazon: How the World’s Most Relentless Retailer will Continue to Revolutionize Commerce, I led a webinar to share valuable insights based on the internal data we collected during this significant event.

In this article, we’ll provide a summary of key points covered during the discussion with leaders in ecommerce, retail, and brand.

Prefer to watch? Check out the full webinar below:

Prime Day Participation

According to Miya, there’s a decline in participation compared to previous years, although sales saw a modest rise. According to Global Data, Prime membership witnessed substantial growth, surging by 25 points to reach approximately 67.8% in 2022.

However, the percentage of Prime members actively making purchases during Prime Day only increased by 13.6 points from 2019 to 2022.

Several factors might contribute to the mixed results of Prime Day. Notably, these figures underscore the influence of major global macroeconomic trends on consumer spending habits and potential challenges that come with it.

Additionally, the event’s timing could have played a role. Prime Day was rescheduled last year due to COVID and that could have affected back-to-school season sales.

Advertising Efficiency in 2023

Amazon’s advertising juggernaut is continuing to gain momentum. Despite the prevailing economic challenges, brands ramped up their ad spending by a significant 24% compared to the previous year.

Amazon also saw about 6-7% increase in their sales year over year. The numbers match our own collected data, which tells us there’s a 6.7% increase in overall sales.

Ad Spend

However, the increased ad spending led to a slight decrease in efficiency. For instance, ROAS on Day 1 of Prime Day dropped from $8.7 in the previous year to $7 in 2023.

From a day level perspective, we also see that higher purchase intent significantly impacts sales, with Day 1 performing remarkably better than Day 2. Consequently, budget allocation should favor Day 1, as Day 2, or succeeding days in a multi-day event, primarily attracts casual observers and late browsers.

Discounts, CPC, and Out-of-Stock Rates

Discounting from consumer brands also decreased, with percentage discounts down to around 30% compared to the previous year’s late 30% to 40%. The data shows that investments went to search and ads rather than discounting.

Cost per click rose by about 23%. This indicates that brands are increasingly investing in Amazon while also facing the challenge of higher expenses for acquiring clicks.

Another significant observation is the increase in out-of-stock rates. This year, brands experienced OOS rates of about 2%, a notable rise from last year’s 0.4% to 0.5%.

This issue poses a significant headwind, as even with the right strategies such as discounting and ad investment, the absence of products on shelves impedes successful customer purchases.

Deep Dive on Discounts, OOS, and Sales

Reiterating data released by Feedvisor, Miya gave important insights on shoppers’ inclination towards everyday essentials during Prime Day.

The steepest discounts are observed in categories like electronics (14% off listed price) and apparel (12% off), which highlight the challenge of attracting customers to spend on non-essential or luxury items during economic uncertainties but also lead to a spike in sales.

It’s crucial to analyze whether deep discounting leads to out-of-stock issues or captures new shoppers. OOS rate is at 2%, compared to 0.4-0.5% in previous years. Higher discount percentages (10% or more) correlated with significant traffic increase (9-10x more compared to the 28 days leading up to Prime Day).

Average Daily Ordered Revenue as a Percentage of Average Daily Ordered Revenue for L28 Days Prior to Prime Day 2023

Source: Internal data from CommerceIQ’s REM Platform for its users from the hours of 12:00AM PST to 11:59PM PST on July 11, 2023 and July 12, 2023 vs 12:00AM PST to 11:59PM PST on July 11, 2022 and July 12, 2022, compared to the 28 days prior average, and the daily average +3, +7 and +10 days post Prime Day.

However, based on the data, we can say that halo effect is at work here. After a 10% discount, the traffic remained about 10-20% higher for the next seven days but mostly returned to baseline levels after 10-15 days. This highlights the minimal impact of discounts on sales in the long run.

To assess Prime Day performance accurately, brands should differentiate between sales to existing customers and those to new customers, as well as consider out-of-stock issues after the event.

Additionally, the data suggests that after Prime Day, the demand for the products with deeper discounts moved forward and sales decreased (75%) post-Prime Day. Brands need a balanced approach to discounting to focus on attracting Prime Day customers without compromising post-event sales performance.

Prime Day across Categories

The category-level view of Prime Day reveals interesting trends. Overall, there was an increase in traffic across all categories, except for beauty and personal care and pet supplies, which experienced a decline in traffic year over year.

Notably, consumable products, particularly grocery and gourmet food, saw a huge boost in sales without a significant increase in ad spend.

This indicates a halo effect, with consumers attracted to discounted everyday essentials. However, it’s essential to assess how much of this increase is truly incremental.

Categories like tools and home improvements increased their ad spend significantly, while home and kitchen maintained similar spending as the previous year.

Prime Day by the Hour

Significance of Timing

Brands typically increase their budgets and bids 2X, 3X, or even 10X during Prime Day. However, it’s crucial to avoid increasing them at or after midnight, as the competition becomes intense and costs per click are higher upfront.

Starting from 8 or 9 AM, there’s a high purchase intent and untapped demand. This results in the highest percentage of revenue and conversions on Day 1 of Prime Day.

Conversion rates decrease slightly throughout the day but experience a bump up at about 7 or 8 PM, likely due to the fear of missing out on deals or after-work shopping.

We see the same pattern reflected on a larger scale. On Day 2, conversion rates, glance views, and sales also decline a bit. But there’s a significant spike in demand towards the end of Prime Day, which brands need to be prepared to capitalize on.

On the hour level, brands need to manage their bids and budgets strategically throughout the day to drive efficiencies. Capturing demand early on, maintaining budget for the peak evening hours, and avoiding overspending at the start are essential to make the most of Prime Day.

Hourly Analysis within Categories

In categories with high deal-seeking behavior like electronics, toys, games, and home and kitchen, 50% of traffic or revenue is reached within the first 15 to 20 hours of Prime Day.

On the other hand, categories like grocery, pet supplies, and office products experience a longer time to reach 50% of revenue, as they benefit from the halo effect of existing site traffic throughout Prime Day.

Future Outlook

Tentpole Events

According to Miya, the trends from recent tentpole events suggest that while sales growth is increasing, the year-on-year growth rate is gradually declining. For instance, in 2021, Prime Day sales grew by 8.1%, and in 2022, the growth rate slightly dropped to 7%, and this year it further decreased to 6.1%.

It’s crucial for brands to carefully consider their retail media ad spend, as Amazon’s dominance in the U.S. retail media market stands at about 77%, but Walmart’s presence is growing at 57%. With other retailers trying to leverage the halo effect of Prime Day, competition is intensifying, and retailers are likely to double down on their efforts.

The consumer’s preference for spending on everyday goods should guide brands in determining where to offer the deepest discounts and allocate their ad spend for maximum impact. As tentpole events become increasingly competitive, brands will need to strategize and focus on incremental gains to stay ahead in the market.

Overall, the challenging global macroeconomic outlook and consumer cautiousness towards bigger ticket discretionary items will continue to pose hurdles. This makes it essential for brands to be proactive in their approach to thrive in the competitive landscape.

Preparations for the Holidays

These are the things you need to do:

Ensure sufficient stock levels and consider implementing direct fulfillment as a backup option in case of inventory shortages in Amazon’s FC on Prime Day.
Optimize your product detail pages (PDPs) by updating your PIM to a daily sync for 4 to 8 weeks before Prime Day. Download keyword trends and map them to each PDP to capture the most relevant terms.
Test and forecast optimal discount levels for key ASINs using price elasticity models and promo simulations to sell through your target units of available inventory.
Expect a traffic bump regardless of heavy investment on Prime Day itself, and consider running a basic offer or discount to capture incremental organic traffic.
For brands relying on Prime Day as a crucial selling day, ensure leadership is aligned to approve real-time budget and deal changes throughout the day, capitalizing on shifts in consumer behavior.