It's going to be Christmas in October for consumers after Amazon (NASDAQ: AMZN) announced it would be holding a second Prime Day event this year. Dubbed the Prime Early Access Sale, the e-commerce extravaganza will be held on Oct. 11 and Oct. 12.
The event is ostensibly intended to fire up consumers who are reeling from inflation ahead of the holidays -- and also blunt the impact of similar sales events being held by Target (NYSE: TGT) and Walmart (NYSE: WMT). However, there are reasons to be concerned that Amazon could dull the luster of its main summer sale by holding too many similar doorbuster sales. It could also mask the slowdown its e-commerce operations are experiencing.
Getting a jump on Christmas
Amazon is extending early access to holiday savings to Prime program members in 15 countries (including, of course, new members signing up for 30-day free trials).
The move comes as Walmart prepared to kick off its own Christmas sales push on Oct. 1 by cutting prices in key categories, extending its returns window to Jan. 31 for products purchased now, and also making it easier to initiate returns by either using curbside pickup or return pickups from homes for Walmart+ members.
Target is similarly getting the season's greetings going early with a Deal Days promotion that will run from Oct. 6 through Oct. 8, discounting thousands of items. The retailer has also said it intends to hire 100,000 seasonal workers to handle the expected holiday sales surge.
"Holiday creep" has been a problem for years, though. Because the Christmas season now can account for as much as 20% to 30% of a retailer's annual revenue, chains have steadily pushed the start dates for their holiday-focused promotions earlier and earlier. This year's moves just continue the trend.
Consumers are cutting back on shopping
Retailers' desires to get a jump on their most important sales period may also reflect their concerns about slowing revenue growth. Amazon's net sales growth slowed in the second quarter to just 7.2% year over year, bringing it to $121 billion. That was a slight deceleration from the 7.3% gain in the first quarter and also the slowest growth rate Amazon has recorded in more than two decades, even though the period included the summer Prime Day sale.
While we won't see Amazon's third-quarter results for a few weeks yet, it's clear that the new Prime Early Access event is intended to juice the company's fourth-quarter numbers. The competition is making similar efforts for similar reasons.
Target suffered a 90% year-over-year decline in profits in the second quarter as it slashed prices on inventory that wasn't moving, while Walmart warned this summer that its full-year profits would plunge by 11% to 13% due to consumers cutting back on discretionary purchases. The retailer had previously expected a 1% profit decline.
The risk for Amazon, however, is it will dilute the effectiveness of Prime Day by having yet another sales festival. When consumers believe they won't have to wait long for another major sale, it reduces their sense of urgency about buying. Adding this October sales event may also undermine the significance of Cyber Monday/Cyber Week, another important sales period for online retailers.
A blue Christmas
Some may see adding a second Prime Day-themed sales event to the calendar as a genius move on Amazon's part, as it allows the e-tailer to remain competitive and appeal to consumers who are spending more cautiously due to inflation. But it's also a worrisome trend as it hides from investors the actual sales slowdown underway.
Bain & Co. forecasts that holiday spending will grow by 7.5% from last year, but when adjusted for inflation, the increase will really only be 1% to 3%. Pulling some sales forward into October won't really achieve anything for the retailer other than preventing later-acting rivals from stealing those sales away from it. While that could make it worthwhile, it could just end up being a wash because so many other chains are doing the same thing.
Amazon is still the place most consumers turn to first when shopping for goods online, but there might not be as much cheer this holiday season, no matter how early its Christmas sales begin.
