Prime Day eyed to boost Amazon post-pandemic

Big annual 2-day sales event arrives amid overall slowdown in online retail

Amazon headed 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 research firm Insider Intelligence suggests sales could climb to about $7.76 billion in the U.S. alone — or 16.8% over last 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’s causing pain at the moment, and that pain is considerable,” said Neil Saunders, the managing director of Global Data Retail.

It’s quite a reversal from the early days of the pandemic when the e-commerce giant’s profits soared as homebound shoppers turned to online shopping to avoid contracting the coronavirus.

The demand was so high that Amazon nearly doubled its workforce in the last two years to more than 1.6 million people.

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.

Saunders said the excess capacity is likely to be a short-term problem for Amazon, which he points out has continued to take steps to grow its retail business and draw more sellers to its service.

To fix its warehousing woes, CEO Andy Jassy said in May the company was going to let some of its leases expire and defer construction on others.

Amazon is also subleasing warehouses to cut costs.