If there's one thing Americans love, it's a good old-fashioned manufactured holiday. And retailers love them even more when we open our wallets to buy plenty of merchandise. For internet retail juggernaut Amazon.com (NASDAQ: AMZN ), that comes next as Amazon Prime Day on July 16. The day for Amazon Prime members and non-members alike will feature plenty of deals. And if history is any guide, it'll be a big boost to AMZN's bottom line/revenues.
But despite the hoopla surrounding the event, Amazon Prime Day may not be that big of a deal for the retailer's future. The sales are great, but the hype could be just that.
Big Sales for Amazon
Typically, there's sort of a retail slowdown over the summer. After Memorial Day, when people are gearing up for summer barbecues, getting their patios and lawns ready, etc., there's a dearth of spending. They don't call it the Dog Days for nothing. To combat this slump, Amazon has taken a page right out of China's playbook. Just as Alibaba (NYSE: BABA ) has seen immense success with the made-up "Singles Day," the e-commerce giant came up with the concept of Amazon Prime Day back in 2015.
And as it turns out, Americans love to shop for deals and the made-up shopping day has been a big hit. Back in 2016, Amazon's Prime Day sales jumped by more than 60% over the first Prime Day. On that day, AMZN sold more than 2 million toys, a million pairs of shoes, 90,000 TVs and hundreds of Kindle devices. Last year was even bigger - with sales jumping an additional 60% to reach a staggering $2.41 billion.
To put that into perspective, sales on Amazon Prime Day were bigger than the Black Friday and Cyber Monday shopping periods. In fact, Amazon sold more goods last Prime Day than it did adding 2016's Black Friday and Cyber Monday together.
So, the stakes are high for AMZN for this Prime Day.
Analysts at Coresight estimate that Amazon will hit a whopping $3.4 billion in worldwide sales this Prime Day. That's 40% higher than last year's sales estimates. However, some analysts have pegged the number even greater as this year features plenty of new promotions, longer hours and cross-marketing in-store with Amazon's now owned Whole Foods Market.
Amazon Prime Day May Not Matter in the Long Run
The potential for AMZN to have another home run on its hands is great. Already, the buzz around this year's Prime Day is great and the hope is that it's able to convert more Prime Members into buyers on the "holiday." The thing is, from an investors' point of view, the day of deals may not truly matter - or at least not as much as people are hyping it.
Amazon Prime Day could be thought of as the icing on the cake. But the cake itself is pretty sweet. That's because AMZN is already dominating the e-commerce world. During the last year, Bezos' baby clocked in more than $178 billion in revenues. Prime Day - even with its strong sales - is still just a blip in that revenue. In terms of total U.S. e-commerce sales last year, Amazon was the dominant force and was able to capture 44% of all those "add-to-cart" clicks.
What's more important to Amazon than Prime Day could be its continued roll-out of Alexa-enabled devices, its surge in private label products and its Amazon streaming video/studio ambitions. These will be the bigger sources of revenue for the firm going forward. Amazon's private-label brands alone booked almost $450 million in sales in 2017 . Recent moves in drug delivery and pharmacy benefits management could also be a huge game changer for investors.
Retail operations aside, we can't forget about the strong growth in its Amazon Web Services (AWS) and cloud computing operations. While rivals have taken some market share away from Amazon, the firm has a place as a premier cloud provider. A shift from being a pay-as-you-go service to a multi-year contract business model is paying benefits. AMZN's backlog of revenue for AWS stands at nearly $12.5 billion.
Amazon Prime Day Doesn't Matter So Much
When looking at the whole, analysts and investors may be putting too much hype into Prime Day.
The boost in sales is great. But it won't make or break the Amazon machine. The firm continues to hit on a variety of different avenues. Realistically, if Amazon drops because it doesn't hit Prime Day sales records, investors should buy it with both fists.
As of this writing, the author did not hold a position in any of the aforementioned securities.
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