Amazon Prime may not be so prime for a bit longer.
On Thursday, the Wall Street Journal said Amazon.com Inc is pushing its Prime Day event from July to September because of the pandemic, citing people familiar with the matter and confirming earlier reports of a possible postponement. The annual shopping bonanza offers exclusive deal discounts to its Prime members and has grown over five years to become one of the e-commerce giant’s biggest marketing events, its own summer version of Black Friday.
There are likely many reasons for the delay, including hopes the economy will be on firmer footing by then, and that customers will be more willing to spend on discretionary items and not just essentials. But it also may signal Amazon’s current challenges may require more time to fully recover.
Amazon needs to be sure it can provide quality service and a large selection when all eyes are on upon it. As of now, it isn’t there yet. Over the last few months, the company has struggled to keep up with surging demand as self-isolating consumers have dramatically shifted spending online. Amazon has faced logistical difficulties in prioritizing essential items, putting stress on its supply and delivery networks. And the complications have led to long shipping delays and product shortages for its customers. The Journal added the company may not be able to return to its fast shipping times "for months”.
On an anecdotal level, many items I want to buy on Amazon aren’t able to promise the one- to two-day delivery that Prime members pay US$119 (RM519) a year to ensure; instead, arrival times can stretch a week or more from the order date. Other people I’ve heard from in different states say shipping times are improving, but overall it still seems hit-or-miss depending on the region, and social media remains filled with complaints on the company’s delivery performance. If lackluster experiences last much longer, Prime customers may start to wonder whether it’s worth keeping their memberships. It was only in January that Amazon CEO Jeff Bezos boasted the company had reached over 150 million paid Prime subscribers around the world, primarily due to the faster delivery times benefit.
At stake is the narrative of Amazon’s e-commerce dominance. The longer it takes for the company to get back to normal, the more runway it gives its rivals. Earlier this month, I wrote how the turmoil sparked by the Covid-19 pandemic is creating opportunities for the tech giant’s rivals, adding if others can show that they, too, can provide reliable good service, then customers may be more willing to choose them over Amazon.
Retailers already appear to be taking advantage of the opening. Target Corp said on Wednesday its online sales growth accelerated every month in its fiscal first quarter, from 33% in February to 282% in April, for a total increase of 141% for the three-month period. More importantly, management said its surveys showed that high customer satisfaction levels for its e-commerce services were driving repeat business.
It is not just traditional retailers that want in on the soaring online sales market. On Tuesday, Facebook Inc announced it is making a bigger push into the e-commerce space with Facebook Shops. The updated offering will enable small businesses to set up online stores for the billions of people that use its Facebook and Instagram apps. Facebook’s initiative, if successful, could diversify its revenue base away from internet advertising to commerce and payment transactions.
Amazon is still the one to beat, and Prime Day will no doubt get its share of hype whenever it’s held. But in the meantime, the competition isn’t sitting still. – Bloomberg
(Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.)
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