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Amazon’s (AMZN) annual celebration of consumerism, Prime Day, is nearly here. Running from June 21 to June 22, the shopping event, which will feature concerts by Billie Eilish, H.E.R., and Kid Cudi, is certain to offer plenty of sales, and rake in billions for the e-commerce giant.
During last year’s Prime Day, which was pushed to October due to the pandemic, sales by third-party sellers surpassed $3.5 billion. Amazon didn’t release total sales numbers for the event, but research firm Digital Commerce 360 estimates Amazon sold $10.4 billion in products. This year, Adobe expects the company to sell as much as $11 billion worth of goods.
And some of the best selling products during the sale were Amazon’s own. In fact, the Echo Dot, which was on sale for $19 from $40, was the top selling product globally during last year’s event. And, as you can guess, Amazon is already pointing consumers to sales for its products ahead of this year’s Prime Day.
The reason? To keep you hooked on Prime.
See, while Amazon makes some impressive products like the Echo, Echo Buds, and Fire TV, it doesn’t make a ton of cash on them like, say, Apple does with the iPhone. Many of Amazon’s products sell for surprisingly low prices. But that’s all part of the company’s strategy of making you a customer of its $119-a-year Prime service for life.
And that’s important for Amazon, because according to a 2020 report from the House Subcommittee on Antitrust, Commercial, and Administrative Law, Prime customers typically purchase more through the company’s e-commerce platform than non-Prime customers.
“Once Prime members pay the upfront annual membership fee, they are likely to concentrate their online purchases with Amazon. According to a recent survey, Prime members spend an average of $1,400 annually on Amazon, versus $600 for non-members,” the report read.
What’s more, Prime’s retention rate is incredibly high, with a 2021 report by Consumer Intelligence Research Partners pegging it at about 93% for those who’ve been members for at least one year, and 98% for those who have been members for two years. In other words, once people sign up, they usually don't cancel their subscriptions.
Amazon knows this, too. That’s why it works to entice people to sign up for the service using events like Prime Day. It’s also why it sells its hardware at such low prices. See, if you purchase an Echo or Fire TV, Amazon’s Prime benefits are on full display at all times. The Fire TV interface puts Amazon Prime Video shows front and center, while the Echo lets you listen to Prime Music without ads and provides Prime members with exclusive sales.