Amazon rivals are primed but unlikely to ruin Prime Day

When Amazon (AMZN) declared a new shopping holiday called "Prime Day" in 2015, it turned out to be a record-breaking success. Now, with Prime Day 2016 happening on July 12, the e-commerce giant's many rivals are trying to muscle in on the company's celebration of free two-day shipping for members of its Prime service and access to its premium content.

Walmart (WMT), which recently unveiled similar service to Prime called, announced on Monday that it would offer free shipping and discounts on selected merchandise all week. Membership to ShippingPass, which like Amazon Prime offers free two-day shipping, is priced at $49 -- $50 less than the $99 annual fee that consumers pay for the better-known Amazon service.

Target (TGT), Best Buy (BBY) and Kohl's (KSS) are among the other retailers that are offering consumers free shipping if they spend a specified amount.

However, R.J. Hottovy, an analyst with Morningstar, said Amazon's rivals face a tough challenge in trying to slow down the Prime Day juggernaut.

"Unless you're giving consumers something that they aren't getting from Amazon at this point, there's little incentive to switch over," said Hottovy, who thinks Amazon shares are attractively valued. He added that "participation rates" may be slightly down this year because the offering was such a big success last year. "It shows how much the Amazon brand is on the minds of consumers these days."

Indeed, Amazon is offering consumers a free 30-day Prime membership trial to take advantage of the deals on Prime Day. The e-commerce giant has vowed that this year's Prime Day will be an improvement over last year after some consumers complained that deals disappeared in seconds and that many were for merchandise that few people were interested in buying. This year, the Seattle-based company says it'll offer more than 100,000 bargains.

"Our objective is to make these all the lowest prices we've had this year or the lowest prices we've ever had," said Greg Greely, vice president of Amazon Prime Worldwide, in an interview with MoneyWatch sister site CNET.

The payoff from Amazon Prime has been huge. Wall Street analysts estimate that Amazon has about 60 million or so Prime customers in the U.S., and in a recent note to clients, Cowen & Co. analyst John Rutledge wrote that Prime members make about 150 percent more purchases than nonprime members. Like most Wall Street analysts, he rates Amazon's shares as a buy.

Prime members are using the service's free shipping to load up on groceries, apparel and other consumer goods, a market that Amazon has been trying to expand for years.

A recently released survey of 2,500 shoppers by Cowen & Co. found that purchases of these items were up by double-digit percentages at Amazon in the most recent quarter, while Walmart's sales were little changed and Target's declined.

Shares of Amazon have been on a tear this year, gaining nearly 12 percent and outperforming rivals such as Apple (APPL) and Google parent Alphabet (GOOG), both of which have lost ground.

Amazon has benefited from the robust growth in its cloud-computing services business, giving it the financial flexibility to entice consumers with Prime Day deals without crushing its profit margins. Its lead in cloud computing is huge. According to Gartner, it has more than 10 times the capacity of its next 10 rivals combined.

Indeed, Amazon's biggest challenge may be in topping its already remarkable track record. Offering Prime Day deals is the easy part.

  • Jonathan Berr On Twitter»

    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.