The Challenges Facing Amazon this Prime Day

Amazon Prime Day has become a go-to date in the calendar for retailers. For Amazon, it’s one of its peaks – heavily discounting to get its army of loyal fans to hit the buy button over and over. For other retailers, it’s a possible catch-22. Do they keep prices the same, or slash them too to try to rival the online behemoth?

What is for sure is that this year’s Prime Day is like no other. Firstly, it’s delayed after the pandemic’s effects. Second, will it actually be successful? For the first time in a while, Amazon is fighting possible belt tightening. Whilst some have money to spend with no commute, others have seen salary cuts, furlough and mortgage holidays, meaning the customer base will be split. Plus, from an operational point of view, will Amazon’s supply chains hold up? Warehousing was tight before the pandemic, now it’s at a critical level. Amazon was not able to manage demand when the pandemic started, now, does it really have the infrastructure in place to manage a surge in demand – or more to the point, do its suppliers?

So, can Amazon actually pull off Prime Day this year? It’s certainly possible but there are a number of factors that will make or break it. Amazon needs to ensure seamless back-end delivery while managing the ways warehouses have been affected by the pandemic. Top sellers can no longer all be stored in one place but must be scattered around the warehouse, and pickers may have to follow one-way systems or avoid busy aisles, which could slow them down. On the flip side, promotional periods often come with a peak in returns as consumers take advantage of the sales to order products they later reconsider. The effects of the pandemic have caused returns to take longer as items must be quarantined before being sent back out, meaning that returned items can’t be immediately restocked. To fulfil orders quickly and manage the exceptional demand that’s expected, Amazon will need to rely on a fully optimised, integrated end-to-end order management system (OMS) and warehouse management system (WMS). Stock integrity will be crucial this year – especially when selling via third parties – and leveraging seamless connected technology is the only way to achieve this. There are also factors at play that are out of Amazon’s control. Global supply chains are breaking down, lead times are being extended and last-minute cancellations are unpredictable. Amazon may have economies of scale and a loyal customer base dedicated to its low prices, but are they willing to wait for products sourced from the Far East or will they instead favour locally sourced and higher-quality – but more expensive – items? Only time will tell.
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