Amazon Prime Day: Does it make sense to sign up for Prime?
There may be Amazon-sized hoopla about the company's Prime Day, which means the roughly half of the American households who don't have a Prime membership may be feeling left out.
The deals offered on Prime Day, which started Monday night and runs for 30 hours, are only available to the company's Prime members. About half of U.S. households participate in the e-commerce giant's popular shopping program, according to an estimate from digital research firm L2. They tend to be wealthier, younger consumers who live in coastal cities such as New York and San Francisco, although Amazon (AMZN) is trying to reach a wider demographic, said L2 head of Amazon research Cooper Smith.
Amazon has designed Prime Day partly to convince those shoppers to open up their wallets and hand over $99 for the annual fee, Smith said. But weighing whether to buy the membership should go beyond today's deals, he added.
"The Prime membership isn't intended to be a membership for one-off purchases," Smith said. "At heart, it's extremely valuable when it comes to purchasing replenishable goods. if you can apply free two-day shipping to consumer packaged goods like household cleaning supplies, oral care products and things you have to purchase on a regular basis, that's where people see the value of a membership."
Yet other experts warn that signing up for Prime might lead to higher spending on Amazon, where products might not always be the lowest price.
"Amazon is hoping that this deal promo for Prime gets the consumer to commit and then not think about subsequent purchases and whether the products are truly cheaper than what can be purchased on other e-commerce sites," said Jim Fosina, CEO and founder of Fosina Marketing Group.
Fosina added, "After you have paid your membership fee, how many of us do that calculation to make sure that Prime membership provides the value and savings of $100 or more on our purchases? Few."
There is a maneuver that could open the door to Prime Day sales while skipping the Prime membership fee. Smith said consumers might want to sign up today for the 30-day trial, but cancel the membership before that period ends.
If you forget, however, you'll be charged the $99 fee on the first day after the trial period expires. If you haven't used any Prime membership benefits within three days after the trial ends, you can still get a full refund. Prime members can also sign up for a monthly membership, which costs $10.99.
As for the value of the deals offered on Prime Day, the jury is split. Amazon's offers in toys and games were much less expensive than at Walmart (WMT), according to an analysis done for CBS MoneyWatch by retail technology Boomerang Commerce. But Walmart's prices on electronics were 3 percent lower than Amazon's.
The best values may be found in Amazon's own brands, such as its 50 percent sale on Amazon Echo. Then again, the company is cannily offering great deals on these electronics because it hopes to spur more purchases later, such as when customers ask, "Alexa, add a bag of almonds to my Amazon order."
In the end, Amazon might be getting the better deal on Prime Day, assuming it's able to convince thousands of consumers to sign up for a membership or buy some of its electronics. For Amazon, it could be the gift that keeps on giving.
"The instant gratification of Prime Day is like a drug that, once you are in, you are hooked on," said Jim Badum, executive vice president at customer relationship management firm Ansira. It's a "smart move by Amazon which will certainly drive quick incremental sales and more Prime members."