Amazon launched its second big promotion in a year for the first time

Amazon will hold a Members Day promotion for the second time in a year this week to boost sales on its e-commerce platform and reverse the decline in sales.

Amazon now hopes to recruit new Prime members in a saturated market, while increasing the value of the service to existing users. In some markets around the world, the price of Amazon's membership service has risen by more than 40% this year.

Under the leadership of new CEO Andy Jassy, ​​Amazon's online store business has experienced two-quarters of declining sales in 2022. This is in stark contrast to the time of the outbreak. At the time, consumer demand was at an all-time high, and sales were up about 40% from pre-pandemic levels.

The Prime Early Access Sale will run for 48 hours in the U.S., Canada, and 13 European countries, including Turkey, starting Tuesday. It's only 3 months since Amazon's Prime Day sale. Amazon launched its annual "Prime Day" sale in 2015.

Lesley Hensell, who advises merchants on Amazon's marketplace, said the new promotions give Amazon an opportunity to move ahead and capture the holiday season this year. “Amazon is thinking: You know what, let’s get in early and get our share of the money. When every company is rolling out their Black Friday and Cyber ​​Monday sales on schedule, Amazon wants a piece of the pie right now. "

Analysts at brokerage Jefferies estimated that the promotion could add $4.1 billion to Amazon's total fourth-quarter profit. The previous forecast was for earnings of about $158 billion, up 14% year over year.

"We're always looking for more ways to help our members save year-round," Amazon said. "The effect of this campaign is to get ahead with holiday shopping and save a lot of money."

Over the past two years, Amazon has faced a slew of headwinds, including the coronavirus outbreak, supply chain pressures, and inflationary pressures that have led to a sharp rise in operating costs. Amazon's stock has fallen by a third this year. Amazon's stock didn't fall further, though, thanks to a strong showing in its cloud computing business AWS, as well as rapid growth in its advertising business.

However, the poor performance of the e-commerce retail business prompted Amazon to abandon aggressive logistics expansion plans. Amazon has closed or canceled at least 50 fulfillment centers in the U.S., according to logistics analyst Marc Wulfraat. Just a few months ago, Amazon warned that a lack of willing and capable warehouse workers was one of its biggest challenges, and eased the hiring of front-line workers in formal roles.

For now, Amazon is prioritizing revenue for the rest of the year. From this perspective, holding a member promotion for the second time this year can bring short-term and long-term boosts.

First, the cost of the living crisis appears to be driving American consumers to look for great deals. A Jefferies survey of about 1,000 U.S. Prime subscribers ahead of this week's sale showed that 82 percent of paying customers planned to shop during the sale, with most planning to spend at least $50. In contrast, only 59% of paying users were interested in the July Prime Day promotion.

Second, Amazon has increased the price of paid memberships in multiple markets, so additional big promotions are believed to further increase the value for members and attract new paying users.

Andrew Lipsman of Insider Intelligence, a market researcher, said: “A big question is how to stay competitive in an increasingly competitive market for paid memberships. Exclusives are key. Amazon understands that. There is a need to provide high-value services that consumers cannot live without.”

According to a survey by research firm Kantar, the average American currently uses two paid membership services. However, from April to August this year, the number fell slightly.

Amazon is tight-lipped about the number of Prime members. The company last updated this figure in April 2021. At the time, Amazon CEO Jeff Bezos said the Prime membership service had more than 200 million paying subscribers. That number is lower than the latest paid subscriber numbers for Disney and Netflix.

Analysts point out that Amazon's strength lies in the breadth of its services. In addition to free one-day or next-day shipping, Amazon is adding more perks to Prime members, such as discounts on a food delivery app Grubhub, and entertainment products, especially Prime Video. In addition, another service called Buy With Prime allows sellers on other platforms to use Amazon's warehouse and logistics facilities to deliver to Prime members in one to two days.

However, Amazon is paying more and more to keep Prime customers happy. Prime Video's The Lord of the Rings, for example, became the most expensive series ever produced. It received mixed reviews when it premiered last month, but Amazon spent as much as $1 billion to buy the rights and produce it.

Amazon is also investing heavily in sports. According to Enders Analysis estimates, Amazon spends an estimated $1 billion per season to become the national broadcaster of the NFL's "Thursday Night Football" program. The company has also added the Champions League and Premier League to its content library. As a result, Amazon spends an estimated $1.6 billion annually on sports rights.

Amazon's investments in Prime digital content and AWS will offset $1.5 billion in savings from logistics network cost optimization in the quarter, Amazon Chief Financial Officer Brian Olsavsky said in last quarter's earnings release. Dollar. That could mean another drop in operating income compared to last year.

However, this is a long-term strategy. Amazon said Thursday Night Football had "the three most U.S. new sign-ups for the first three hours" of its Prime membership service, attracting an average of 13 million viewers.

In the U.S., annual growth in Prime membership is expected to slow to less than 3 percent, according to estimates from Insider Intelligence. About 70% of U.S. households are expected to pay for Prime by 2025, up from 67% this year.

The further expansion also means that Amazon will reach different groups of people. Last week, Amazon launched a platform dedicated to offering deep discounts and relaunched its "Prime Access" service, which offers low-priced Prime memberships to users who qualify for government subsidies such as food stamps.