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How Brilliant Amazon's Prime Day Really Is

In this segment from Market Foolery, host Chris Hill and Motley Fool Rule Breakers' Aaron Bush discuss the value of Prime Day for Amazon (NASDAQ: AMZN) and its third-party merchants, which is far greater than even fans of the e-commerce giant might think. Plus, there are plenty of ways the company can improve it and squeeze even more value out of the gimmick.

A full transcript follows the video.

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This video was recorded on July 11, 2017.

Chris Hill: This is dominating the business media today because, this started two years ago on Amazon's 20th anniversary as a company. You and I were talking yesterday, and I confessed to you that, even as an Amazon shareholder, when Prime Day came up two years ago, I just remember thinking, "This seems kind of cheesy." I get it, it's their 20th anniversary, but it just seems like a pretty shameless way to get people to sign up for Amazon Prime. As an investor, I should have been thinking, "Look! A great way to get people into Amazon Prime!" And even though they had problems in 2015, and frankly, the press coverage wasn't all that positive either, this is one of those things that only takes us two years -- some people saw it in the moment -- but now, we can look back and say, "This was yet another master stroke by Amazon."

Aaron Bush: Yeah. I think Prime Day is a bigger deal than people think it is. Absolutely, it helps acquire new customers, new Prime members. But I think that's probably actually most relevant internationally. If you think, India or Mexico, where they're newer and haven't really won over the space yet, having Prime Day is something that no one else can really do, so it attracts a lot of attention. Also, they can use Prime Day to leverage the members they already have. I was just looking this year, it seems to be all about the Echo. I won't say the A-word.

Hill: Yes. It has been helpfully pointed out by some of our listeners that, you need to call the Amazon Echo by its name, which is the Amazon Echo. If you say, as Aaron said, the A-word, then for anyone who actually listening on their Echo, it activates the Echo and messes up the listening. So, thank you.

Bush: Absolutely. Anyway, when consumers who have an Echo are able to get deals earlier, and sometimes they have more Echo-specific deals, and of course the Echos are on sale, too, so it's just driving what they want to be driven. Then, lastly, and I think this is probably a bit more under the radar, this actually affects the sellers, too. Over the past several quarters, there's been an acceleration of third-party sellers who are moving their services to fulfillment by Amazon, in which case they can take advantage of the manufacturing and the logistics, and be eligible on Prime. What's really interesting to me is, if you play Prime Day forward, you can see how they can add more tactics and strategy to it whenever they launch a new service or device. Even this Whole Foods deal, think about what they could do with Prime Day for that. Or, even the past couple weeks, they brought Nike on and built a storefront for Nike, or are going to. Bigger customers, bigger brands could also have a presence on Prime Day, too. So, I think Prime Day is just getting started.

Hill: If you think back to, again, for those who weren't paying attention in 2015 when this happened, you saw, on balance, negative coverage of this. Even people in the business media were saying, "We don't know exactly how many new Prime members they signed up, but they probably signed up a bunch, so long-term this was a win." But, short-term, Amazon took a little bit of a reputational hit, because there were some technical glitches, there were a lot of accusations of bait and switch, similar to what we see on Black Friday with traditional bricks-and-mortar retailers, where they're advertising the 90-inch flat screen TV to get you in the door and they only have a few of them on hand, and it's like, "We don't have those," those same kinds of things. I remember people were generating lists of pretty absurd, esoteric products that were on sale for Prime Day that you would look at and think, "Who is buying this 55-gallon tub of Vaseline?"

Bush: Hey, don't judge. [laughs]

Hill: But, it does, as you talked about, if you play this forward, you can think about the different things they can do with it. In a way, Amazon's first Prime Day was always going to be their worst, in terms of the experience, because they do what they do at Amazon, which is they put something out there and then they say, "OK, this worked, this didn't, how do we make it better?" Way back in the day when they were just focused on, "What does the main page of Amazon look like? What are people clicking on? How do we make the experience more seamless?" I'm going to be doing some shopping tonight. I didn't do it on either of the last two. But, again, they've gotten better at it.

Bush: Yeah. If you need any ideas, I have a couple for you that I pulled in. The Roomba, today, I noticed, 33% off. You can get yeti garden statues for 30% off.

Hill: Wait a minute, the yeti garden statue, I've only ever seen that in, I'm blanking on the name, but there used to be this magazine you would get, it was a catalog you would get on airlines, and there would be a yeti statue. Is this the big one? The 6-foot yeti statue?

Bush: I think so. There are various versions, and you can get them all.

Hill: 33% off?

Bush: I think it's more like 30% off. Still.

Hill: All right. Get with me right after the episode, because anyone who's ever walked around Fool headquarters knows that a large yeti statue would not be out of place in a corner somewhere.

John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Aaron Bush owns shares of Amazon and WFM. Chris Hill owns shares of Amazon and WFM. The Motley Fool owns shares of and recommends Amazon, NKE, and WFM. The Motley Fool has a disclosure policy.