Today is Prime Day: Amazon’s bid to transform paying them $99 for an annual membership into a national holiday. The Internet oligarch is blanketing the Web with deals and enticements to encourage sign-ups. It even pitches this as a way to get a jump on holiday shopping—Amazon is literally selling Christmas in July.
The real intent here is behavioral: to make US consumers feel like they should shop only at Amazon. As Amazon CEO Jeff Bezos said last year, “Our goal…is to make sure that if you are not a Prime member, you are being irresponsible.” According to estimates from Consumer Intelligence Research Partners, 80 million households have Prime memberships. Because the primary benefit of Prime is free two-day shipping, shopping more at Amazon increases the perceived value of the membership, keeping users stuck inside the Amazon box. CIRP reports that the average Prime user spends $1,300 a year with Amazon, compared to $700 a year for the non-Prime Amazon shopper.
To get people to take that plunge, Amazon promotes big deals, which is consistent with its strategy of accepting major up-front losses in a relentless quest to dominate commerce and become America’s company store. (Type relentless.com into your browser and it goes to Amazon.) Armed with incredible amounts of shareholder capital, Amazon can simply pummel competitors into submission. So Prime Day is not just a sale, it’s a threat to any company selling anything in America.
This year on Prime Day, Amazon is offering four months of unlimited streaming music for 99 cents, a clear challenge to Apple’s iTunes and other streaming services like Spotify (which costs 10 times as much). The goal is to move people off alternative networks and into the Amazon universe, where everything is cross-sold and cross-promoted. Amazon also has major Prime Day sales on technology like its Alexa devices (one of which is designed for listening to music; all the better to pull people from streaming competitors). These devices make ordering on Amazon as simple as saying “buy paper towels” out loud. Again, the sale serves as behavioral marketing to make competition to Amazon unlikely.
Diapers.com is a good example. Their parent company, Quidsi, initially resisted Amazon’s buyout bid. Amazon responded by slashing prices so deeply on diapers, Quidsi executives estimated that Amazon was willing to lose $100 million on the product in three months to rip away market share. Diapers.com realized they couldn’t compete, and Amazon bought them out.