Why Amazon’s Prime Day may not be the holiday shopping bellwether it usually is this year

In prior years, Prime Day sales growth has helped serve as a predictor for holiday season e-commerce sales. In 2020, for example, Prime Day’s sales growth of 42.8% paralleled the holiday season’s 38.1% increase, according to eMarketer. And both the 2021 and 2022 events correlated the holiday season in terms of sales growth, with rates in the high single to low double digits, eMarketer also found.

Yet, despite strong Prime Day numbers this year — both in July and October — those metrics are complicated by a tough holiday season dominated by a shorter-than-usual holiday calendar and uncertainty around the upcoming presidential election in the U.S., along with persistent inflation and high interest rates. 

By several measures, Amazon’s summer Prime Day event in July was a success. Shoppers in the U.S. spent a record-breaking $14.2 billion online during the 48-hour sales blitz, up from 11% the year before. Similarly, Amazon characterized its Big Deals Prime Day event, which took place earlier this month, as the “biggest October shopping event ever.”

Still, many factors indicate that consumers may not have the same appetite for spending as the holidays approach. 

The National Retail Federation, the country’s largest retail trade group, said earlier this month that it expects holiday sales in the U.S. to grow between 2.5% to 3.5% from November to December, a slower pace than last year when sales rose 5.3%. This month, Deloitte also forecast that shoppers plan to spend 3% less on holiday gifts compared to a year ago.

In other words, shoppers are laser-focused on deals above all else, which could dampen their willingness to spend in November and December, according to Natalie Kotlyar, national leader of BDO’s retail and consumer products practice. As such, retailers should brace for heightened price sensitivity this holiday season. While the inflation rate is coming down, Americans are still grappling with higher prices and are being choosier with what they buy, often opting for chapter alternatives across product categories. 

“Although Amazon had a successful Prime Day, I don’t think it’s necessarily an indication that it’s going to be a strong holiday season,” Kotlyar said. “The consumer is looking for deals. The consumer is more educated than ever, and that’s where we saw a significant uptick in Amazon Prime Day sales.”

That points to retailers offering heavy promotions and discounts to lure inflation-weary shoppers who are hesitant to splurge this shopping season. Indeed, discounts are expected to drive online sales this year, according to Adobe Analytics, and discounts should average about 30%, the same as a year ago. 

Despite an expected slowdown in U.S. holiday sales overall, online sales will climb 8.9%, the highest spending pace since 2021. The uptick in online sales suggests shoppers are increasingly turning to e-commerce platforms to hunt for bargains, especially as upstart e-commerce sites like Temu and TikTok Shop gain a stronger foothold in the U.S. 

“You have so many online retailers entering the fray, both domestically and offshore, and that produces a lot of competition,” said Vivek Pandya, lead analyst at Adobe Digital Insights. “Given that the key driver for consumer decision-making is price, they’re all competing on price, so that drives down prices and helps amplify the discounts that we’re seeing.”

This holiday season, retailers offering steep discounts will come out on top. Indeed, supermarket chain Target said on Tuesday it was cutting prices on more than 2,000 items across a range of products ahead of the holidays. The move came after Walmart and Aldi also said they planned to lower prices to appeal to cash-strapped shoppers. Target and Walmart have also been turning to private-label store brands to boost sales as more Americans trade down to cheaper products. 

“This will not be the season for big-ticket items unless they’re significantly marked down,” Kotlyar said. “It could be a race to the bottom for retailers because if one marks it down 10%, then another retailer will mark it down 15% just to get that consumer to come in and make that purchase.”

Another factor is the shortened holiday season. With five fewer days between Thanksgiving and Christmas, retailers, including Walmart, Target and Amazon, have introduced deals earlier. As such, consumers are shopping earlier than ever before. 

This year, only 24% of shoppers in the U.S. are waiting to start their holiday shopping in November or December, according to Gartner. Doing so helps consumers not only stretch their budgets but also dedicate more time to searching for holiday deals. Invariably, this means fewer consumers are spending less during the months of November and December, a period when the bulk of holiday shopping has historically taken place.

“It’s not so much that consumers aren’t shopping, but rather they’re shifting their shopping forward,” said Kassi Socha, director analyst at research firm Gartner. “Consumers are looking for the best price, so if they found it earlier, say in summer or fall, they’re not going to buy that gift in November or December.”

A survey of more than 1,000 respondents from PissedConsumer.com found that almost half of shoppers will complete all of their holiday gift-buying by November this year.

Finally, some industry players expect uncertainty around the upcoming presidential elections in the U.S. could weigh on consumer spending power this holiday season. Amazon’s chief financial officer Brian Olsavsky, for example, recently said events like the election make it more difficult to predict consumer behavior.

“There’s a lot of events that are occupying people’s attention right now from political conventions to the election itself to the Olympics,” Olsavsky told reporters after the company reported second-quarter earnings in August. “No matter what you’re selling or providing, customers only have so much attention.”