For Amazon, Prime Day 2022 May Be More About Growth Than Sales

Prime Day is Amazon's e-commerce anchor. Each year, the massive marketplace can count on Prime members spending billions of dollars during the event, which last year generated record sales of about $11.2 billion.

Prime Day 2022, which begins Tuesday, is expected to top that high water mark once again. But between an e-commerce slowdown and stagnating Prime membership numbers, this year's event might be less about sales and more about growth for Amazon AMZN.

Analysts are skeptical that Prime Day can regain the momentum it had before the pandemic. Insider Intelligence expects Prime Day 2022 to generate global revenue of $12.52 billion, a year-over-year (y/y) increase of 17%, per the firm's most recent forecast.

That's an improvement on 2021's y/y growth rate of 8%, but it's a far cry from what Amazon was accomplishing before the pandemic. In 2020, Prime Day generated y/y sales growth of 43%. The year before that, it brought in 67.8% more revenue. But with global e-commerce sales decelerating, Prime Day also has fallen victim to the slowdown.

Analysts at JPMorgan and Jeffries predict only single-digit improvements to sales growth. JPMorgan anticipates that Prime Day 2022 will bring in $3.8 billion in incremental revenue, a jump of 7% from 2021. Jeffries, meanwhile, projects the event will contribute $4.7 billion to sales, a 4% boost. But revenue isn't the only value Amazon can reap from the event.

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"We see Prime Day helping to boost Prime adoption, especially in international markets, which have lower membership penetration and three new countries participating in 2022 Prime Day," Jeffries predicted.

Following years of sustained growth, Prime membership has wavered in recent months. In March, Amazon raised the price of its annual Prime subscription from $119 to $139. According to Consumer Intelligence Research Partners, which surveys Prime customers, the service had around 172 million members as of June 30 — the same as it did six months earlier.

"After years of steady and even explosive growth, Prime membership is flat," said Michael Levin, a partner at the firm.

Amazon also ended free Whole Foods delivery for Prime members in September, which, combined with the fee hikes, led to a pair of class-action lawsuits against the company. One suit alleges Amazon ripped off customers by removing a large part of the subscription's value after they had already subscribed. The second accuses the company of misleading advertising that caused customers to believe the offer was still in place.

Watch: What early Prime Day data says about consumers

There is some evidence to suggest Amazon is taking a different approach to Prime Day as a result of its recent struggles. 

Acquiring and retaining Prime customers appears to be top of mind for the marketplace, even at the cost of revenue. Analysts are high on Amazon's decision to offer an array of early deals and perks, seeing them as a great way to attract new members. 

Last week, the marketplace added another incentive when it partnered with Grubhub to offer premium perks to Prime subscribers. While that will likely put a dent in Amazon's wallet, it gives it another tool to boost membership.

Amazon is also taking steps to attract more merchants. Ahead of this year's event, it included more incentives than ever before to try to put third-party sellers in front of customers. Through one initiative, every dollar customers spend with third-party sellers enters them into a prize pool, which includes rewards such as a trip to the next Super Bowl.

Investors shouldn't expect groundbreaking sales growth for Prime Day 2022. But a shift to recapture Prime membership may bode well for Amazon's stock.

"We believe that positive impacts of all these endeavors are expected to get reflected in Amazon's third-quarter 2022 performance," Zacks said of the company's recent subscriber-oriented moves. "This, in turn, is likely to raise investor optimism on the stock."

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