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Amazon’s Prime Day Event is About Much More Than Good Deals

By Chris Neiger - Jul 7, 2015 at 6:00PM

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Amazon's upcoming day of great deals is also about keeping its top spot among online retailers.


Source: Amazon.

Here's what we know: Amazon.com's (AMZN 3.54%) upcoming Prime Day event on July 15 claims to have "more deals than Black Friday," with special offers every 10 minutes on items, unlimited free shipping, all for new and existing Prime members. The company's celebrating 20 years of existence and it's rewarding its most loyal customers with a slew of good deals for 24 hours straight.

For those who aren't currently Prime members -- and don't want to pay right now -- they can still participate by signing up for free, 30-day trial membership and gain access to all of the deals, then cancel before the trial is up. 

But of course, that's not what Amazon wants them to do. Aside from celebrating its birthday through its popular membership service, I think there's something else going on with Prime Day, and it has to do with Amazon's upcoming competitor, Jet.com.

Why Amazon cares about Jet
Jet.com is a members-only special deals club (think of like an online Costco, without the food samples or famously affordable hot dogs) that users pay $50 per year to gain access to. The site is currently in private beta right now, but set to launch publicly later this year. Members can buy items on Jet.com for 5%-6% lower than anywhere online, and if users are willing to hand over their email address, pay with their debit card, or agree not to return an item, then the price could drop even lower. 

Source. Jet.

Jet.com's founder Marc Lore clearly knows what he's up against. A few years ago he started Diapers.com, then got into pricing war with Amazon's diaper sales, which resulted in Amazon buying Diapers.com parent company, Quidsi, for $550 million.

According to The Wall Street Journal, prices on Jet.com are cheaper than on Amazon, although Jet doesn't have as many items as Amazon right now. And as Jet.com's launch looms, Amazon is taking notice. 

Prime time for competition 
Jet's business is a bit different than how Prime works, but for Amazon it's likely a little too similar. While Amazon's Prime Day event may not be entirely focused on competing with Jet.com's deals (considering the site is still in beta) I think it's a way for Amazon to get online users think of Amazon -- and only Amazon -- as the best place for online deals.

Re/code pointed out this month that Amazon's upped its special deals for Prime members as of late, offering discounted prices on video games and sneakers, in addition to its other, more random, deals for Prime members.

Amazon could snag a lot of new customers from its Prime Day in hopes that many will stay on as paying Prime members, and be less likely to check out Jet's website when it launches later this year. Amazon is a fiercely competitive company and taking this step gives it the advantage of offering new value to its existing customers, while giving potential Prime customers access to great deals. 

If Amazon can convert a lot of new 30-day Prime trial customers into paying ones, and get current customers to question why they'd ever want to spend an additional $50 for a membership elsewhere, then Prime Day will be a huge success. For Amazon, July 15 is more than just a celebration, it's also about picking another online retail fight. 

 

Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Costco Wholesale. The Motley Fool owns shares of Amazon.com and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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