Amazon.com Inc. is holding its annual Prime Day summer sale for 48 hours today and tomorrow, sending a surge of parcels through the supply chain and forcing rival retailers to ask what they can do to compete with the online colossus.
Now in its fifth year, the sales event has proven to be more than just a stunt, adding another shopping and shipping peak to the retail calendar and earning nicknames like Summer's Black Friday, or Christmas in July.The large scale of Prime Day now sends ripples through the economy that extend beyond Amazon's own corporate borders, as retailers large and small launch their own sales to latch onto the event's momentum.
However, catching a ride on the Prime Day wave requires special planning on the part of all the companies that can't match Amazon's logistical muscle, experts say.
Most small and mid-sized businesses (SMBs) simply can't compete with Amazon's nationwide one-day delivery, or with the similar blistering fulfillment speeds offered in some cities by rivals Walmart and Target, says Steve Dowse, senior vice president of product management at Blume Global, a Pleasanton, Calif.-based provider of supply chain visibility and analytics software.
But with responsive service and personal attention to detail, smaller companies can still meet soaring consumer expectations for quick gratification and high-quality experiences, he said. "Peak season sales are focused on Amazon, Walmart, and Target, but many smaller retailers are also doing a lot of business," Dowse said. Smaller shops can compete by offering a high level of service through nimble practices such as carrying inventory in the right place for what a customer really wants, and not just offering them the inventory that happens to be available to ship to their home tomorrow.
For many retailers, that goal is easier said than done, according to Ilias Simpson, senior vice president for fulfillment services at Radial, a King of Prussia, Pa.-based third party logistics provider (3PL). "Determining appropriate inventory levels for fulfillment centers, particularly during peak periods such a Prime Day, is one of the most challenging tasks for operation teams," Simpson said in an email. "If you carry too much inventory, you tie up money in working capital, and if you don't carry enough inventory, you face stock-outs."
A critical tool for managing peak surges is inventory optimization technology, which can analyze both historical and real-time data to help retailers optimize their total cost to speed and their total cost to serve by tracking three critical data points: the outbound and inbound volume footprints and the shipment's final destination, he said.
The challenge may be more complex this year than ever, since 2019 has a host of external economic factors such as tariff threats, trade wars, and consumers' increased expectations. In addition, a number of major retailers are now creating their own "mid-July" sale strategies to compete with Prime Day, Simpson said.
For example, the online shopping marketplace RetailMeNot estimates that 250 retailers this year will host similar sales by offering deals of their own, up from 194 last year. That crowded field will put pressure on all retailers to win over consumers with the right tactics, not just the sweetest deals, according to Michelle Fischer, chief customer and marketing officer at management consulting firm Kibo.
"Though Black Friday deals and last-minute gift shopping are still months away, Amazon's Prime Day sets the precedent that holiday season shopping starts now. With hundreds of retailers following in the e-commerce giant's footsteps and offering Christmas-in-July-like deals, retailers should pay close attention to consumers' attitudes and preferences in order to get the most out of their mid-year discounts," Fischer said in a release.
Instead of blasting out cookie-cutter emails to boost their sales, retailers can customize the experience by sending personalized recommendations based on each consumer's history, highlighting what shoppers are likely to purchase in addition to sending information on products in stock at high inventory levels, she said. "While consumers are after a good deal, personalization, inventory visibility, and multiple fulfillment options can augment the experience and increase shoppers' likelihood to make another purchase or recommend the retailer to someone else," said Fischer.
Retailers can also provide custom shopping experiences by focusing on shipping and delivery, according to Convey Inc., a logistics technology firm based in Austin, Texas.In 2018, the Amazon Prime Day surge flooded the U.S. Postal Service with volume, pushing average transit times for parcels from 3.3 days to 4.4 days, a rise of 33 percent, Convey said.
"It's an important warning sign for USPS and the retailers who rely on it this year: Amazon is not only expanding its own delivery footprint, but also increasingly biting into sales and shipping capacity for others during this period — requiring them to find new ways to create positive customer experiences and uphold brand promises through actionable insights and collaboration," Carson Krieg, co-founder and director of carrier operations at Convey, said in a release.