Did your margins drop during this year’s Prime Day? Don’t worry, they should have done

Prime Day has been over long enough for the initial sales spike to settle and for most brands to have reviewed their performance. In many cases, those results will show something finance teams rarely enjoy seeing: revenue increased, but margin fell.

It is easy to interpret that as a disappointing result. We would argue that, for most brands, it may be exactly what should have happened.

Why? Well, Prime Day is not a normal trading period. Brands invariably have deeper discounts, competition for visibility increases and advertising has to work considerably harder, so paid activity will naturally account for a greater share of sales than it would during an ordinary trading period.

That is not necessarily a sign that Prime Day underperformed. It may be evidence that the brand competed as it intended to.

Paid sales should do more of the work

During Prime Day, shoppers are actively comparing products, prices and promotions. Competition for their attention intensifies, and brands that normally rely on organic visibility can quickly find themselves displaced.

This is why advertising should typically account for a greater share of sales than it would during an ordinary trading period. Expecting the additional demand to translate automatically into organic sales is rarely a sound strategy.

There are exceptions, of course. Established category leaders and products with unusually strong organic positions may behave differently. But for most accounts, maintaining normal advertising levels while competitors increase theirs is more likely to protect margin than grow the opportunity.

There is also a competitive cost to holding back. If other brands are prepared to invest and you are not, they have an opportunity to improve their visibility and ranking with less resistance, potentially at a lower cost than if you were competing with them properly. 

The right question is not simply, ‘Did we make a margin?’

A lower margin over four days can be entirely rational if the investment has:

• attracted new-to-brand customers

• increased product and category visibility

• accelerated a new launch

• improved sales velocity

• strengthened the brand’s position beyond Prime Day

The mistake is not sacrificing margin; it is sacrificing margin without being clear about what the investment was expected to achieve.

Measure what Prime Day leaves behind

Prime Day performance should be assessed beyond the event itself.

Look at the balance between paid and organic sales, customer acquisition, product-level performance and what happened to visibility and sales velocity afterwards. Those measures provide a better account of value than event-period margin alone.

Ranking is a particularly important part of that picture. A strong Prime Day can move a product into a significantly better organic position, with the resulting increase in visibility continuing after the event has ended. Where that happens, the improvement in organic sales and overall revenue can more than recover the margin given up during Prime Day itself.

This is why the four-day margin figure, viewed in isolation, can be misleading. The more useful question is whether the investment improved the product’s position and created a return that continued once the discounts and additional advertising had stopped.

If your margins fell, that does not automatically mean something went wrong.

If they did not, it may be worth asking whether you pushed hard enough.

Prime Day is only one of Amazon’s key selling periods, and the decisions that shape performance are usually made well before the event begins. If you want to review what happened this year, or discuss how to prepare your products, advertising and budgets for the next major trading date, speak to our team.