July 12, 2022
Amazon is heading into its annual Prime Day sales event on Tuesday much differently than how it entered the pandemic.
The company has long used the two-day event — one of its biggest all year — to lure people to its Prime membership, for which Amazon recently raised the price to $139 a year from $119 a year.
Amazon doesn’t disclose total Prime Day sales, though growth estimates for last year’s event had ranged from 7% to 9%. Research firm Insider Intelligence suggests sales could grow even more this year in part because of the event’s mid-July timing, which compared to last year’s June date would allow the company to capture more consumers doing back-to-school shopping.
Amazon could use the boost amid a slowdown in overall online sales. Once the darling of the pandemic economy, the company posted a rare quarterly loss in April as well as its slowest rate of revenue growth in nearly two decades — at 7%. Inflation had added roughly $2 billion in costs.
Amazon also acknowledged it had too many workers and expects its excess capacity from its massive warehouse expansion during the pandemic to total $10 billion in extra costs for the first half of this year.
It also increased its warehouse capacity to match the avalanche of orders flooding its site. By the end of 2021, Amazon had leased and owned roughly 387.1 million square feet of space for its warehouses and data centers — more than double what it reported in 2019.
Then, the worst of the pandemic eased. Americans felt more comfortable leaving their homes, and demand also slowed across the board. The retail sector’s online sales growth in the U.S., which spiked to 36.4% in 2020, returned to more normal growth in 2021 and 2022, clocking in at 17.8% and 9.4% respectively, according to Insider Intelligence.
Retail sales figures for June, due to be released Friday, will shed more light on how e-commerce is faring. The most recent figures from May showed online sales falling 1% while overall retail sales declined 0.3% from April amid skyrocketing inflation.
“This is a period of time when consumers are being much more frugal thinking about how they’re spending and buying,” said David Niekerk, a former Amazon vice president of human resources who oversaw operations. “That’s having an impact on Amazon.”
