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Why a Prime mover could be just the shake-up the industry needs


Today is the day Amazon marks its 20th birthday. When it started life it sold books, via the internet, hoping to gather enough data about its customers that it could eventually start selling them other things that match their interests.
Now it’s unleashed a day of promotions that it claims will put Black Friday deals in the shade: Amazon Prime Day, which is happening right now, in case you have been hiding from your inbox and were blissfully unaware.

Amazon Prime Day is only available to Prime account holders, and while no one knows precisely how many of those there are, the most credible estimates are in the region of 50-60m worldwide. What proportion can be found in the UK is also unknown, but a guess of 10-15% wouldn’t be regarded outlandish by many.

According to research from eDigitalResearch, almost half (42%) of Amazon Prime members in the UK are going to buy something today, although only 53% said they had heard of the event.

The success of Prime Day is very likely, according to eDigitalResearch, who found that 13% of those surveyed said they often purchase more than intended during one day sales events. When looking at those respondents who are already Amazon Prime members that jumps to 34%.

Chris Russell, Chairman at eDigitalResearch and visiting professor of digital consumers at University College London, said: “After the overwhelming success of Black Friday for retailers like Amazon, it’s not surprising that they’re trying to re-capture a surge in sales with the first ever UK Prime Day. Our results show that the one-day event is likely to have a real impact on the purchase decisions of Amazon Prime customers and will more likely than not, be hailed a success.”

If it takes off, it is likely there will be a spate of copycat promo days. In the US, Walmart has said it will run its own day of discounts today, too. But the introduction of 24-hour flash sales, with their own branding and identity – such as on the anniversary of the retailer’s establishment, or similar – could well become milestones of the retail calendar.

The downside of peaks

But could there be a flipside to this potential new wave of peaks? What might be some of the effects of high volumes of discounted goods, as seen around Black Friday/Cyber Monday and Christmas, becoming the norm?

Katie Kinraid, Global Product Manager, Blackbay

Katie Kinraid, Blackbay

Asked if more peaks might be a good thing for the overall health of the delivery sector, regardless of promotion-related margin pressure, Blackbay’s global product and marketing manager Katie Kinraid, said: “More peaks might help but the real issue is a lack of collaboration, and the industry hasn’t woken up to this yet. There’s a lack of collaboration across the whole industry in terms of providing visibility.

Just compare it with what it’s like buying an airline ticket – you can see all the airlines and all the available tickets, and you know that you have to buy early or you risk missing out on the best prices or your preferred routes. There’s simply nothing approaching that level of visibility, and the industry needs to start convincing customers that there’s value in delivery services. It’s not helped by the practice retailers have of using delivery as a gimmick to get people to buy.”

“All carriers would be happy any extra volume,” says Simon Veale, director at Global Freight Solutions. “Ecommerce is still settling down, really; still finding its own rhythm. Prime Day will really only affect those carriers that work with Amazon, but they need to know what’s going on in terms of expected volumes. Peaks aren’t a problem as long as communications are good. If everything sold on Prime Day goes out as next-day that could be a problem. The best way round it is to provide people with choices at the check-out.”

Too much choice can be a bad thing

Ian Caminsky, CEO of InPost UK, is more guarded than some and sees the potential downsides as worth consideration: “The fast-growing trend towards online flash sales such as Amazon’s Prime Day is clearly good news for consumers from a price perspective, in this case promising larger discounts than Black Friday. However, this increase in online sales and orders as a result of the surge in demand has in the past presented a series of logistical challenges for carriers.

AMAZON“One obvious solution to this problem is for retailers to offer shoppers a full range of delivery and click and collect options. Rather than couriers having to deliver to a number of home addresses, emerging delivery solutions such as automated click and collect lockers help to make the delivery experience overall more convenient by providing one parcel drop-off point rather than several.

“Fewer drop-off points can make a big difference as they allow couriers to be more time, fuel and cost-efficient while shoppers get their hands on their purchases at a time to suit them. Retailers also benefit from helping to reduce delivery chain pressures and from minimising the impact on customer services and reputation more generally when packages are not delivered as promised.”

Christmas without the tree or the stress

Mark Denton, Head of Presales Consulting at BT Expedite, thinks Christmas might have come early. Although, as he points out, there simply isn’t the same deadline-pressure with an artificial peak as there is with Christmas: “Prime Day is something of a masterstroke from Amazon, presenting all the potential opportunities of a major shopping day but cleverly navigating the logistical challenges that often come with these days with the absence of any pre-existing external deadlines.

“Also, not only will Amazon increase the number of Prime subscribers, it has introduced a second retail Christmas, a whole five months early. A win-win in many ways.

For Amazon’s competitors, the challenge will now be about how not to lose too much business to Amazon on the day. I am expecting a flurry of special offers, from flash sales to free delivery and various other ploys. But in the midst of all of these, retailers must ensure that they have the infrastructure in place to meet increased activity and customers’ expectations.”

John Pincott, Shopatron

John Pincott, Shopatron

John Pincott, European MD at order management solutions provider Shopatron, thinks there’s a warning bell being sounded for Amazon’s competitors. It’s time to figure out what your strengths are and play to them: “High street retailers need to consider how they will effectively compete in the long-term with the retail and supply chain behemoth; and one way is to capitalise on the assets they have that Amazon doesn’t.

“Retailers with both an online and brick-and-mortar presence need to start using the inventory in their stores to their advantage, offering it for immediate pickup (without a £79 membership fee, mind you) and even shipping items from store to shoppers’ homes rather than letting the inventory sit in a marked-down heap in the store.

“By using some of their stores as ‘mini-distribution centres’ many retailers can offer inventory in more places than the online pure players. This cuts down both the cost and time taken for deliveries to reach the end consumer, and puts retailers on a stronger footing when competing with the online giant.”

Not everyone sees this as a ‘add tree, have Christmas’ affair though. Mark Thornton, Marketing Director at Maginus thinks the whole Prime Day thing could be a bit of a damp squib: “Amazon’s Prime Day is not really a Black Friday event as it only targets a relatively small segment of the Amazon customer base and of course Christmas is not around the corner.

“However, it is a superb opportunity to advertise the Prime benefits of free shipping to out-sell Amazon competitors who are going in the other direction in terms of charging for delivery.

“My expectation is that it will be a non-event in the UK with other retailers ignoring the Amazon competition for the day having been bitten once by selling at a loss on Black Friday.

“If it is a huge success, perhaps a strategic alliance of like-minded retailers could partner and create their own ‘Prime-like’ brand, offering free delivery (perhaps for click-and-collect only – to get footfall in-store) on specific cost-effective products, such as those that are easy to box and ship and hold for click and collect.”

Hope is not a strategy for success

Where there are peaks, there are always troughs. Where there are hills, there have to be valleys. Such is the way of things and the introduction of more peaks won’t change that in the retail logistics world. It could have some interesting unintended consequences though.

AMAZONIn the run-up to November 2014, parcel volumes began to fall off dramatically. That had the effect of exaggerating the contrast with the exceptionally busy period that followed. A business that can stay busy more often tends to cope better with seasonal pressures. If Prime Day becomes a thing, and if other retailers start picking dates from the calendar to run their own equivalents, the quieter periods could be shorter and less severe.

But, as we’ve seen in the case of Yodel – which is setting limits for the amount of next-day Black Friday deliveries it will commit to – taking decisive action is paramount. Whether it’s setting limits, or investing in new systems, or findings ways to increase the visibility across the sector, waiting and hoping is no substitute for pre-empting problems.

It remains to be seen what the outcome and fallout from Prime Day will be, but we are keeping a weather eye on it at eDelivery. We are also keeping an eye on preparations for Black Friday, which is now only 135 days away.

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