Amazon Prime Day was designed as a celebration of Amazon’s 20^th birthday – it was first launched in the US in 1995. The UK followed 10 years later and the rest of Europe in 2007. As we discuss in Mintel’s report on Online Retail - UK, July 2015, it is one of the key planks of Amazon’s retail proposition. It ties people in and rewards more frequent shopping.

Add-ons such as Prime Instant Video may be great in their own right, but they are also valuable add-ons to Prime, making it even more attractive.

We discussed Prime Day in a recent Analyst Insight “Amazon uses exclusive sales to drive long-term loyalty - 14th July 2015”. There would be more products discounted than on Black Friday. There would be “lightening deals” and six popular deals of the day. Its main purpose was to recruit more members to Prime

Amazon had to advertise its intention – the promotion would be too short to attract customers if it had not. And yet in doing so it gave time for competitors to respond. Wal-Mart was unlikely to be the only one to run a day of special deals in response.

Cdiscount was running major promotions for 14^th July, so getting in a day early, to counter Prime Day (or Premium Day as it is called there). Cdiscount is one of the very few online retailers to have mounted a serious challenge to Amazon, although, in this case, only in France.

Prime Day was actually on a Wednesday and that, unlike Black Friday, was a working day for everyone, even in the USA. So Prime Day was certain to be just an online event, but would Amazon be the only beneficiary?

Amazon wants to attract more Prime members, and it will of course benefit from a sudden leap in its membership in the period preceding Prime Day. But if Wal-Mart is running parallel promotions the event will also have the benefit of boosting the online appeal of other retailers. John Lewis would price match, because it always does, Cdiscount would also be promoting.

It seems to us that customers are too well informed these days. A promotion such as this risks boosting sales but at a cost of pulling sales forward, which would otherwise have been made at full margin. Black Friday last year provided a huge boost to sales, but at a significant cost to sales and margins over Christmas.

In an era when every retailer knows what all its competitors are doing and when all of their customers know as well, does this sort of major promotion really work? If Amazon really does gain and retain a lot of new Prime customers, then perhaps it will be worthwhile, although there is a potential risk that it could prove to be an expensive way of making a small gain.

We think that it is time that retailers rethought their policy on promotions. One of the major impacts of the internet is that people are much better informed and that is acting to take price out of the equation. We think that in the longer term there will be little to be gained from cutting prices because all the competition will do so too. Retailers will have to fight on everything else that makes a retailer great, because price will be taken for granted.

The key to Prime Day was to draw attention to what is already a great service. The risk is that it will prove to have been a very expensive day. Cutting prices is too blunt a tool. Consumers deserve something more sophisticated.