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Behind the Numbers: an EMARKETER Podcast
How Amazon is Weathering Tariffs, Prime Day’s Surprise, and the AI Bracelet of the Future | Behind the Numbers
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- [00:00]
Marcus
Unlock more growth with awin. Tackle acquisition, conversions and retention by tapping into a network of over a million affiliate partners with everything from partner management to reporting and payments in one easy dashboard, AWIN helps brands drive real scalable results. Visit awin.comemarketer to learn more. Hey, gang. It's Friday, August 15th. Rachel, Jeremy and listeners welcome in to behind the Numbers, an E marketer video podcast made possible by awin. I'm Marcus and today we have two folks joining us from our New York studio, retail newsletter analyst, Rachel Wolf. Hello.
- [00:41]
Rachel Wolf
Hey, Marcus. Thanks for having me.
- [00:43]
Marcus
Of course, of course. And Senior Director of Briefings, Jeremy Goldman. How are we doing?
- [00:46]
Jeremy Goldman
Hey, I am doing great and I have some really cool stuff to tell you, but I know the fact of the day has to come before anything else.
- [00:55]
Marcus
Go on.
- [00:57]
Jeremy Goldman
Happy birthday Ben Affleck, Jennifer Lawrence and Silas Winslow Goldman. I have to say this because my first. My first son, second kid, is a big fan of yours, Marcus, and also of Amazon. So he's really excited for this episode.
- [01:13]
Marcus
Silas is our only listener. I don't know if that's true, but it might be. We have one. It could be him. Why did you name him third? Of all the people you listed, Silas? I'm terribly sorry.
- [01:24]
Jeremy Goldman
I think more people are familiar with Ben Affleck and Jennifer Lawrence, are they not? They won't be.
- [01:29]
Marcus
Absolutely not. Yeah, we'll put. We'll cut. Silas, impressed. Hello, size. Happy birthday to you. I don't care about the other people. Anyway, today's fact of the day. In Japan, there is an island called Okunoshima full of wild but friendly rabbits. This one's a good one. The island is nicknamed Rabbit Island. Fitting. And the bunnies approach people without fear because there are no natural predators. Cats and dogs are not allowed on the island either. And so you can just go and hang out with them and they're like very friendly.
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Rachel Wolf
That's interesting.
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Marcus
Rabbits are normally friendly.
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Rachel Wolf
Isn't it true that rabbits can die of fright? Like, I think I've read that somewhere.
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Marcus
Bring us down, Rachel.
- [02:17]
Rachel Wolf
Abnormal rabbits.
- [02:19]
Jeremy Goldman
How did they get there, though? Like, that's what I.
- [02:22]
Marcus
There are a few theories, yeah. I spent too much of my day really looking into it, but yes, there are a few theories of how they got there, but no one is certain for sure. Well, so here's another fact about rabbits. In 1807, French military general, the statesman Napoleon Bonaparte was attacked. He wasn't really attacked by hundreds. Swarmed by hundreds of rabbits during a rabbit hunt organised in his honour. Instead of fleeing the hunting party. They charged Napoleon and his charged is a lot and his men, some reported this was because they weren't wild, they were tame and hungry. They were unfed and so they just swarmed him. He had to run away, didn't he?
- [03:05]
Jeremy Goldman
In fairness, wasn't he known for carrying a lot of carrots in his pockets?
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Marcus
I don't think that's true.
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Jeremy Goldman
That's not true.
- [03:13]
Marcus
I wouldn't explain things. He secretly Bugs Bunny waspily Anyway, today's real topic Amazon after pledging to keep prices low, Amazon hiked them on hundreds of essentials, reads a Wall Street Journal headline. The article reads in the five months since President Trump first announced sweeping tariffs, Amazon quietly raised prices on low cost products such as deodorant, protein shakes and pet care items, according to a Wall Street Journal analysis of nearly 2,500 items in April. Amazon said it would hold the line on prices, the article notes. But the Journal's analysis shows that prices from e commerce data firm Traject Data found that while Amazon's price on the 1200 of its cheapest household goods went up, competitor Walmart lowered prices on the same items by nearly 2%. Amazon did respond by saying the products tracked by the Journal weren't representative of the company's prices overall. But Rachel, how is the world's largest online retailer weathering tariffs so far in your opinion?
- [04:24]
Rachel Wolf
I think overall it's weathering it pretty well. I mean if you look at this past quarter, they had another solid quarter of growth. We had online store sales up 11%. So like they said, they're not seeing any decrease in demand so far. As you said, they are pushing back very strongly against the narrative that prices are going up. And I think so far it seems like most sellers are working through pre tariff inventory, you know, inventory they brought in while tariffs were lower. So it's possible that yes, the price impact has been negligible. Whether this will hold also remains to be seen. There are a lot of questions there but I think so far Amazon is holding up extremely well.
- [05:09]
Marcus
Yeah, that to your point, their growth in I mean the growth overall was impressive. They had a smashing quarter. Top line was over 13% growth on basically $170 billion in the quarter growing faster than last Q2 and it's the fastest quarterly growth top line since Q4 2023. The line you're talking about online stores, net sales that was up 11%. If you go back previous Q2 it was up 5 previously 4 for previously negative. So this 11 is exceptional to be frank. But Jeremy, it Seems to what Rachel was kind of ended on. It does seem like they're not out of the woods yet. Rachel, you noted in one of your articles that the range for Q3 suggests that there could be, we said, Rachel, a drop of 11% to a gain of 18. And so that range in itself, you were saying, indicates considerable uncertainty going forwards. Jeremy, what do you make of the retailers, the online retailers, negotiation through this world of tariffs so far?
- [06:15]
Jeremy Goldman
I think that they're. Rachel's right here. They definitely have some sellers that have. They planned ahead. You know, like there was a lot of signaling that the, the relative chaos that retailers and CPGs have had to deal with in the first part of the year knew about this. So they could, you know, both. If you're a seller on Amazon, you have contingency plans in place to some degree. But that does wind up catching up to Amazon the longer this goes on, you know, and Amazon's right to basically have a degree of caution in terms of what this looks like going forward because it's not like Amazon can say, yeah, we think that like November 12th is the day where the relative chaos tied to tariffs is going to be done. They don't really know, so they can have projections, but nobody quite knows. And as a result, they have to hedge a little bit by not saying that Q3 is going to be gangbusters.
- [07:15]
Marcus
Yeah. And I guess it's nice that they've got a Prime Day. It feels like it's in Q2, but it's not, it's in Q3. And it's nice for them to have that in the books and have a sense of how that went. And that's going to shape obviously the rest of the quarter with the remaining August and September. Amazon extended this year's July prime day event from two to four days. US retailers drove just over $24 billion in online spend. All of the retailers during that period up, that's up 30% year over year for the Amazon Prime Day event, 8th to 11th July, I believe these numbers were from Adobe. An article on retail dive by Danny James. Jeremy, for you, what was the biggest takeaway from Prime Day this year?
- [08:03]
Jeremy Goldman
So I think the biggest takeaway is that Prime Day is just going to be something that winds up getting diluted over time. I think we've kind of seen this a little bit. I was even looking at some data ahead of Prime Day this year about, you know, knowing that Prime Day was going to be more days, you know, how do you plan on making purchases? What is this going to do. And a lot of people said, yeah, I'll spend more time shopping on Amazon. But the Tinuity study also said that, you know, some people are going to wait until later in the event in order to pull a trigger, right? Which then, you know, if you're somebody like me, you put 17 things in your wish list. And then, you know, if you get around to it, maybe you pull the trigger. But that also means that people are less. Like, it's not like a flash sale, right? It becomes longer and longer. And I think people just feel like it's business as usual. And I worry on Amazon's behalf, like, like they need me to worry for them that, you know, Prime Day just becomes something that people don't pay enough ATT attention to necessarily. And it's just going to be harder and harder to anniversary whatever success they have.
- [09:15]
Rachel Wolf
I think. I guess I see it a little differently. I don't think that Prime Day is going to be less important, but I think that Amazon's share of spending is going to start to fall because one of the notable things is when you have a longer event, you give people more opportunity to comparison shop. And we really saw Walmart target, all of these retailers get a pretty big bump during that period. So I think, you know, people are coming to expect sales in July, but whether they keep going to Amazon for all of those purchases, I think will definitely shift.
- [09:46]
Jeremy Goldman
I think, by the way, that's a really good point. Is that the average shopper, that from all the studies that we look at Marcus, the data shows that they're, they get on average more sophisticated every year. You know, like they're, they do price comparison. They have tools that allow them to do this, right? So when Amazon says, wow, this thing is 40% off, maybe a few years ago people might have said, well, I better buy that now. But now it's easier than ever to just say, like, I'm just gonna make sure that that's a good price. You know, is that a price, as in some cases where the price actually went up the few weeks before Prime Day so that then a seller could discount off of a higher number? You know, like, often that is the case. And I think that consumers are getting wise to that over time.
- [10:33]
Marcus
Yeah. On the discounts piece as well, I noticed that the higher prices from tariffs meant people said that they needed larger discounts. And so they're expecting the discounts to also go up before they buy. This chart here from Tenuity showing that when asked how tariffs will affect Prime Day shopping, the number One response from prime members was that they needed to see larger discounts before pulling the trigger. That's more than the share of folks who are buying things now before prices went up and more than the share of folks who were just spending less. They were saying, I just need big discounts to account for the increase in prices.
- [11:08]
Rachel Wolf
Yeah, I think the other interesting part is going back to the Adobe data is that they mentioned that a higher share of items being bought were in higher price points. So I think it goes both ways. Like yes, people are looking for bigger discounts, but they are also using these sales as an excuse maybe to buy more expensive things that they wouldn't have bought otherwise.
- [11:27]
Marcus
Yeah, they are, but it's also. There's some of that. But Jeremy, I think I want to pick up on a phrase that you used which was business as usual and it does seem to be that that way for a lot of folks. There's this chart again from Genuity showing that everyday essentials are what most folks buy on Prime Day and they've been doing that for a while. But you can see 51% of US prime members on this chart saying that they were likely to buy essentials they would have bought had it not been Prime Day. They're likely to buy those during the event and again from Genuity and that's more than the folks, a lot more than folks who are back to school shopping or impulse buying or. It does seem like it's just, let me just get the regular things I was going to get but at a discount because this, this day, which is now turning into half a week, I mean eventually, what do we think bets on next year being a week five day, a full five day event?
- [12:20]
Jeremy Goldman
Probably first I think of Amazon Smart, which they are, they're going to also lean into what are other ways to meaningfully discount. And that might not be a prime day, but it might be like a making up an idea. But like Amazon, if you're listening, which you often do because you're Marcus's second listener, it won't be.
- [12:40]
Marcus
It's just stylus.
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Jeremy Goldman
I think it's definitely valuable to find other ways to discount and to keep people on their toes rather than people just like waiting for this big sale. So could it mean there's going to be one crazy hour in the middle of August where you know there's deep discounts but you've got to be paying attention and you're going to get a push notification on your app and it's going to be things that are never discounted you know, something like that, that wakes people up, that feels new rather than something that just feels baked into the equation.
- [13:10]
Marcus
Yeah, yeah. Dynamic pricing I think is really interesting. I think I mentioned this a few years ago at my university they had this thing where at the, the local bar which was part was on the campus, they would do this this evening where it was like stock prices for drinks. And so you might walk into the bar and a glass of Coke might cost $2 and then you know, you keep paying attention to it and maybe in 20 minutes it price crashes and now you can buy it at like 30 cents a glass or if you come in maybe. Oh, actually it's just gone up. You waited too long to get the drink. Now it's $5. And they would do that across different drinks to keep people engaged, do something fun. I do wonder if, if Prime Day would do something like that. Jeremy, to your point of like a flash sale, keeping people people engaged, making them pay attention throughout the event versus so, because Rachel, I really like the way, the way you had phrased it, you were talking about daily average. Daily. Average daily sales fell significantly. But you were saying that sellers and shoppers basically had recalibrated their behavior to accommodate the longer event because total money was up but the average was. Averages were down because they had longer to spend.
- [14:19]
Rachel Wolf
Yeah. And you know they are doing this to a certain extent. Amazon does have special discounts that they, I think prime members, you can put out alerts for certain things if they go on sale. They do have sales that go out even before Prime Day so you can keep an eye on what's happening. But yeah, I do think that it will be a struggle for Amazon to figure out how do you engage shoppers over a longer period of time. And that also plays into advertising. Right. If you're an advertiser, maybe you don't want to allocate too much spending to the first couple days. Maybe you do go all in on the last two days when you know that people have the most intent. So I think it's going to be sort of test and learn for them next year. I think they might stick with for maybe five days just to see again like what can they do to get people to stay engaged over the entire period.
- [15:09]
Marcus
Yeah, yeah. The advertising line item pretty healthy. 23% growth in Q2 that is up from basically 20% last Q2 and becoming a significant piece of their business. This quarter it was just over 9% of their whole business. Was the advertising piece the final story? I wanted to focus on Here with regards to Amazon was about their, their AI ambitions. Though one headline from Nicole Ninguyen, the Journal, stated why Amazon wants an AI bracelet that records everything you say. That sounds fun. She explains that Amazon is buying Bee, maker of a wearable bracelet that transcribes your conversations and uses AI to create searchable histories and action items in a to do list. Rachel, is this Amazon's AI future?
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Rachel Wolf
I think it's one piece of it. I mean, I'm always slightly skeptical about these kinds of AI devices because I don't know how many people would feel comfortable having a device that they know, you know, Amazon is listening to every word they say.
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Jeremy Goldman
Although I guess that's technically like, do people have an echo? Yeah, so.
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Rachel Wolf
But I think it's different. I guess people feel differently about having it in the home versus, you know, wearing it all the time and it doesn't play music as far as I know.
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Marcus
And the echo is supposed to have like a wake word, right? The lex is supposed to have a wake word, whereas this is supposed to just, you switch it on, it's listening the whole time.
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Jeremy Goldman
In theory, echoes have been known, including mine, but there are many other reports of it just starting to do something even when it's asleep or supposed to be asleep and not paying attention to you. So that's worth noting. But by the way, the whole entire thing about like, what its AI future is, you know, if you have the ability to spend. Rachel and I were talking about this offline right before. If you've got the ability to spend, this is in some ways, like what you have to do in order to show the market that you're doing innovative things. But also then you're spending so much on AI and you have to show like, is that money to good work? Like, in some ways they're darned if they do, darned if they don't, you know. And a lot of the companies that we cover, we just had a triopoly advertising earnings report that we put out that basically showed that there's been a substantial expenditure from Meta, Google and Amazon in AI that is far greater than the increase in ad spending or in Amazon's case, in terms of online sales. Like, basically it has not been justified yet in relation to the dollars spent.
- [17:50]
Marcus
Yeah, yeah. It's hard to know how much to focus on this because their competitors, a lot of the big tech players are investing in these things. Meta has their Ray bans smart glasses. OpenAI just hired former Apple designer Jony. I've to come up with some kind of AI focused device. So it does seem like almost like we better do something, but it probably isn't going to be our entire future.
- [18:15]
Rachel Wolf
Yeah, I think for Amazon, really the big question is how is, is Genai and AI going to affect the shopping journey? Right. Is it going to take people away from Amazon? Are tools like ChatGPT or perplexity going to be the places where people discover products, in which case, you know, what does that mean for Amazon's retail media business, for example, or even its ability to build loyalty and collect data from its customers? So I think in terms of investment, I would say that probably a lot of the money is going there. You know, how do you create a business that is protected from AI shopping agents, but how do you build your own shopping agent to take advantage of the fact that you think that that's how people are going to shop in the future?
- [18:56]
Jeremy Goldman
The whole caveat that I think you're right to point out, Rachel, is that there are other people trying to figure this out that are basically platform agnostic and then you have a lot of people who might be competing on value. So in a lot of ways this ties into how is the economy going, because as we know, people will do a lot more price comparison behaviors when it's A, frictionless for them relatively, and then B, when they are more price sensitive. So if people are more price sensitive, this is going to be difficult to keep people within the Amazon ecosystem.
- [19:31]
Marcus
Yeah, that's all we've got time for for today's Amazon conversation. Thank you so much to my guests. Thank you to Rachel.
- [19:37]
Rachel Wolf
Thanks, Marcus.
- [19:38]
Marcus
And to Jeremy.
- [19:39]
Jeremy Goldman
Pleasure as always.
- [19:40]
Marcus
And of course to the whole editing crew, that is Victoria, John, Lance and Danny to studio runs the team and Stuart, Sophie does our social media. Thanks to everyone for listening in to behind the Numbers Remarked, a video podcast made possible by Awin. We'll be back Monday, happiest of weekends.