Ama­zon Prime Day is, by many accounts, a bid by the ecom­merce behe­moth to stir-up sum­mer spend­ing by intro­duc­ing a sec­ond day of mass dig­i­tal dis­counts in the vein of Black Fri­day. How­ev­er, the deep­er sto­ry involves a fierce bat­tle for cus­tomer loy­al­ty and mem­ber sub­scrip­tions that is break­ing out in the ecom­merce are­na.

Today Ama­zon is cel­e­brat­ing Prime Day, a one-day-only glob­al shop­ping event that will offer, in the ecom­merce retail­er’s own words, “more deals than Black Fri­day”. Cru­cial­ly, there is one key dif­fer­ence between the two: today’s Prime Day deals will be avail­able exclu­sive­ly to Prime mem­bers, Ama­zon’s $99/year pre­mi­um-mem­ber ser­vice.

Wait… Did Amazon Just Make This Up?

While dig­i­tal mar­keters have long used sea­son­al pro­mo­tions as a means of boost­ing sales, since when did it become accept­able for a brand to cre­ate an event-based sales day around exact­ly that (their brand) and that alone?

Jonathan Alder­son, founder of daysoftheyear.com, a web­site that aims to “bring all of the world’s weird, fun­ny, won­der­ful and bizarre hol­i­days under one roof,” is no stranger to brands look­ing to lever­age “event days”. How­ev­er, there is a obvi­ous risk to Ama­zon’s Prime Day strat­e­gy. Just slap­ping your brand and a hash­tag on a cal­en­dar date or sea­son­al event and expect­ing the asso­ci­a­tion to res­onate is going burn bridges and rep­u­ta­tion pret­ty quick­ly, accord­ing to Alder­son.

“If you’re cre­at­ing your own ‘days’, it’s best to decide up front whether it’s essen­tial­ly just a brand­ed sale, such as Prime Day, which does­n’t antic­i­pate build­ing any kind of broad­er com­mu­ni­ty, longevi­ty, or equi­ty in its own right, or whether you’re look­ing at some­thing big­ger. As more brands fill more of them up with their own shal­low ‘deal days’, they’re going to mean less and less – you’re encour­ag­ing con­sumers to be deal-dri­ven and to shop/switch around, rather than build­ing brand asso­ci­a­tion and con­nec­tion,” Alder­son said.

“If you’re think­ing big­ger, about start­ing or engag­ing with an event with a wider mean­ing, then it’s impor­tant to under­stand that event days and micro-hol­i­days are cre­at­ed cel­e­brat­ed and shared ‘as a democ­ra­ti­za­tion of time itself’. These events are, at the heart of it, col­lec­tions of peo­ple who are carv­ing out a place to define, reflect upon, or cel­e­brate the things they hold dear to them,” Alder­son said. “To blunt­ly apply inter­rup­tion mar­ket­ing tech­niques to an estab­lished com­mu­ni­ty won’t cut it. Tread light­ly, and earn a voice in a con­ver­sa­tion which is about more than just you, your prod­ucts, and your cut-price bar­gains.”

While Ama­zon Prime Day will clear­ly have its detrac­tors, the brand has a strong track record in the field. After all, Ama­zon has become one of the biggest brands offer­ing Black Fri­day and Cyber Mon­day dis­counts, and has in recent years tak­en to offer­ing an entire week of heav­i­ly cut price deals.

Exclusive Discounts: A Risky Move?

Exclu­sive to Prime mem­bers. At the risk of sound­ing like a bro­ken record already, this one detail is crit­i­cal to under­stand­ing the rea­son­ing behind the event. It opens up a whole host of ques­tions about the retail­er’s strate­gic moti­va­tions.

First­ly, there’s the nat­ur­al fall­out from con­sumers who feel left out, or who are sim­ply down­right resent­ful of the con­cept of mem­bers-only dis­counts. In the past, con­sumers have made their feel­ings clear about the retail­er’s deci­sion to have one treat­ment for Prime mem­bers, and anoth­er for reg­u­lar users.

While mem­bers-only dis­counts undoubt­ed­ly work effec­tive­ly for retail­ers such as Cost­co, there is a clear con­tin­gent that feel that it isn’t fit­ting for a retail­er that prides itself on cus­tomer-cen­tric val­ues, and pro­vid­ing an excep­tion­al user jour­ney that has tra­di­tion­al sought to make low prices, a diverse prod­uct range, and excel­lent cus­tomer ser­vice avail­able to all.

One user even took to poet­ry to express his dis­taste with Prime Day:

As an out-and-out ini­tia­tive to boost sum­mer spend­ing, Ama­zon Prime Day seems a risky move, and not only because of the exclu­sion­ary ele­ment. As one com­men­ta­tor stat­ed: “it is a strate­gic mis­take. They are get­ting shop­pers accus­tomed to see­ing that lev­el of pro­mo­tion­al offers the whole year.”

It’s dif­fi­cult to com­pre­hend that Ama­zon would be so naive as to think that there would­n’t be a degree of fall­out for intro­duc­ing a day of mem­bers-only dis­counts.

So what, real­ly, was their strat­e­gy moti­va­tion behind the move?

And why, if the aim was to encour­age a boost in July spend­ing, did they not sim­ply intro­duce a sec­ond Black Fri­day, where dis­counts would be avail­able for every­one?

Battlelines Are Being Drawn

Ama­zon’s move has­n’t only alien­at­ed cer­tain con­sumers, it’s also incit­ed a reac­tion from com­pet­ing retail­ers.

Wal­mart is the most high-pro­file brand to launch a counter-offen­sive, declar­ing in a blog post that they will also be hold­ing a day of sales. In what seems to be a direct move against Ama­zon, Wal­mart has bold­ly stat­ed that their sales will be for every­one “who sees no rhyme or rea­son for pay­ing a pre­mi­um to save.”

Tar­get, Macy’s, and JCPen­ney are among the oth­er retail­ers with plans for a July dis­counts sales push, and Ama­zon’s move has led one HBR ana­lyst to say that the strat­e­gy rep­re­sents Ama­zon “clear­ly set­ting its sights on ful­ly invad­ing land-based retail ter­ri­to­ries.”

Ama­zon Prime Day must, in the cut­throat and inva­sive world of ecom­merce, be inter­pret­ed as noth­ing less that an aggres­sive step. Per­haps the most fit­ting ques­tion for ana­lysts is why they have picked this par­tic­u­lar moment to make their move.

Prime Is A Loss Leader?

Ama­zon has nev­er been over­ly con­cerned with prof­its. At the heart of the orga­ni­za­tion has been an endur­ing com­mit­ment to cus­tomer ser­vice and a unfal­ter­ing belief, embed­ded in the com­pa­ny cul­ture, that if they do right to the con­sumer, that future suc­cess­es will fol­low. In fact, in the 2014 fis­cal year, they are esti­mat­ed to have made a $241 mil­lion net loss.

In addi­tion, Ama­zon’s 40 mil­lion Prime mem­bers spend $1,500 per year on aver­age, com­pared to non-mem­bers, who spend $625 per year on aver­age, accord­ing to Con­sumer Intel­li­gence Research Part­ners report. Yet, Suchari­ta Mulpu­ru, an ana­lyst at For­rester research esti­mates that Ama­zon los­es $1 bil­lion to $2 bil­lion a year on U.S. Prime ship­ments – a loss that is even more excep­tion­al when you con­sid­er that it amounts to 11 times as much as Ama­zon’s oper­at­ing prof­it.

Some­thing does­n’t quite add up. Essen­tial­ly, Ama­zon’s move amounts to a risky, and some­what alien­at­ing move that pur­sues short-term prof­its in a way that is unchar­ac­ter­is­tic for the retail­er.

In fact, the one goal that Ama­zon Prime Day does seem to pri­or­i­tize, and per­haps the clue was in the name all along, is loy­al­ty sub­scrip­tions to it’s epony­mous, Prime.

Loyalty, Disruption…

While Wal­mart may have laid their stake in the ground, firm­ly on the “dis­counts-for-all” side of things, they were per­haps nev­er Ama­zon’s chief con­cern. Then who is?

Jet.com is due to launch July 20, just five days after Ama­zon Prime Day. On clos­er exam­i­na­tion, it’s dif­fi­cult to con­sid­er the two events are but pure coin­ci­dence.

With­out even a web­site, Jet.com filled many a busi­ness head­line at the begin­ning of this year as a hot prop­er­ty in the world of dig­i­tal ven­tures, and pos­ing a gen­uine threat of dis­rup­tion to a sec­tor which has more-or-less fought itself to a uneasy bal­ance of pow­er.

Jet’s busi­ness mod­el does some­thing that Ama­zon has nev­er pri­or­i­tized – lever­age the pow­er of loy­al sub­scribers, and for­go­ing almost all poten­tial prof­it mar­gins, to offer its mem­bers siz­able dis­counts.

The pow­er of this mod­el is sim­ple. Low­er prices. As re/code sums up: “We searched online for a Sonos Con­nect device and decid­ed that $349 was pret­ty much the best price out there. Then we checked Jet: $301. Wows­er.”

If Jet can pro­vide accept­able lev­els of cus­tomer ser­vice, it’s fair to say that con­sumers would­n’t argue with that kind of sav­ing. The obvi­ous con­jec­ture, is that Ama­zon per­ceives Jet, or indeed the Jet mod­el, to be a gen­uine threat to their val­ue propo­si­tion, and has decid­ed to pre­empt the launch of Jet.com with a day cel­e­brat­ing their own mem­bers-only dis­counts.

…Churn? (Or Will Loyalty Work?)

Ama­zon Prime Day is begin­ning to look like part of a grand chess game. Bear­ing in mind the cus­tomer dis­sat­is­fac­tion as a result of the event, the fall­out from mem­bers-only exclu­sion, and the pre-emp­tive grab for mar­ket­share as retail­ers seek to intro­duce loy­al­ty-based dis­counts, the ques­tion still remains:

Is a hard push towards mem­ber­ship and loy­al­ty pro­grams a good move for Ama­zon?

Alder­son, who as well as found­ing daysoftheyear.com, is also Head of Insight at Linkdex, said the fol­low­ing:

“Loy­al­ty pro­grams have always been an effec­tive form of cor­po­rate bribery; vouch­er codes and dis­counts in exchange for mar­ket­ing per­mis­sions, tai­lored adver­tis­ing and behav­ioral data has always been a pow­er­ful trade-off for brands. The idea of ‘mem­ber­ship’ of a brand is some­thing a lit­tle dif­fer­ent: there are a few brands in a tra­di­tion­al­ly ‘retai­ly’ space, such as Achi­ca (and, Ama­zon Prime if we con­sid­er it to be a slight­ly dif­fer­ent enti­ty to Ama­zon), who are heav­i­ly push­ing the con­cept of mem­ber­ship (paid or oth­er­wise) as a con­cept beyond sim­ply hav­ing an account.”

The prod­ucts-as-a-ser­vice brands have a dif­fer­ent mod­el, one engi­neered from the ground up to lean on a vir­tu­ous cir­cle of mem­ber­ship, refer­ral and growth. How­ev­er, when it comes to whether exist­ing retail­ers such as Ama­zon can uti­lize such a mod­el, it may encounter unique chal­lenges, he said.

“You can’t bolt their ‘mem­ber­ship and com­mu­ni­ty’ com­po­nent onto an exist­ing retail mod­el or web­site effec­tive­ly – espe­cial­ly one which is, for exam­ple, just access to a poor­ly indexed prod­uct ware­house.” Alder­son said, “I already get too many emails and too much junk mail, pay for too many sub­scrip­tion ser­vices, and have too many loy­al­ty cards in my wal­let. While a move toward gat­ing access to pref­er­en­tial treat­ment and prod­ucts might ‘lock me in’ to a sub­set of brands, it’ll just as soon spur a wave of enter­pre­neurs to set their sights on cre­at­ing busi­ness­es and mod­els which tar­get all the peo­ple who aren’t part of the club.”

It’s pos­si­ble that Ama­zon Prime Day, by prin­ci­ple, is too much of an impo­si­tion on con­sumers online shop­ping expe­ri­ences. Although con­sumers may be bliss­ful­ly unaware of the strate­gic moves and tac­tics being played out in the ecom­merce are­na in a bid to win con­sumer loy­al­ty, what they will notice is a stream of pushy mes­sages, or a con­stant impe­tus to sign up to this loy­al­ty pro­gram, or that mem­ber­ship mod­el, as a means of gain­ing this par­tic­u­lar dis­count.

“The sys­tem will churn,” Alder­son said. “And I’ll still have too many loy­al­ty cards, and too many emails, etc. Over­all, I’m not sure we, as an indus­try, will achieve much by try­ing to inject a ‘mem­bers only’ fla­vor into the gen­er­al retail mod­el.”

Per­haps it will sim­ply be too much for con­sumers. It may be sup­po­si­tion, but part of the appeal that exudes from dig­i­tal cul­ture is its nat­ur­al sup­port for open­ness and inclu­siv­i­ty. In recent years, Ama­zon has prid­ed itself on being able to pro­vide the remotest regions with the same lev­el of ser­vice that they offer those from cos­mopoli­tan areas.

Demand­ing cus­tomers to com­mit to a paid loy­al­ty pro­gram may be one way to deliv­er low­er prices, but in the long-term per­haps Ama­zon could ben­e­fit from stick­ing to their lau­rels and con­tin­u­ing to pro­vide and improve expe­ri­ences for the huge, and large­ly loy­al con­sumer base that uses their site on a day-to-day basis, in bat­tles that they have already won.

Let us know your thoughts on Ama­zon Prime Day… Will it prove to be a good move for the retail­er?