What Amazon Prime Day means for third-party sellers

Dan Howley joins Myles Udland, Brian Sozzi, and Julie Hyman to discuss how even though Amazon's Prime Day is a chance for sellers to boost their sales, the day still has its downsides as third-party sellers must keep up with the the high consumer demand in orders and assess if it’s worth it for the business.

Video transcript

MYLES UDLAND: It is Amazon Prime Day, the first of a two-day special event. Yahoo Finance's Dan Howley joins us now to talk about, Howley, what all the deals are. We were all just chatting in the break as a group. The mask is kind of off on Prime Day now. It's sort of just they're unloading what seems to me a lot of electronics junk that's sitting around in Amazon warehouses. And look, some of these things you might need. They are decent prices. But is there anything to be excited about in particular, or is it just kind of a rehash of what we've now come to know Prime Day as?

DAN HOWLEY: I think it's a little column A, little column B. Right? We were just talking about how there's these kitchen shears that are on sale, and they're one of the main deals on the site right now. I also got something for dumbbells, which, I mean, hey, they were really hard to find this time last year, so nice to see that they're available. But there are going to be kind of some of the big tech items that people are interested in, some of the more appealing items probably. But don't forget, Prime Day started as, basically, a way for them to sell toilet paper more.

You know, the first year was basically just nonsense that people were like, why is this even an event, then they slowly started to add more stuff. But you will see deals on things like TVs, things like big appliances. Hopefully you can find something, or you know, if you're looking for something out there, you probably will find a good deal on it. But there will be those kind of deals where you're just like, what, why the hell am I looking at scissors on Prime Day? Wasn't this supposed to be a big event with a concert and everything like that?

JULIE HYMAN: These are all good questions. I mean, it's also really interesting because, right now, inventory is so tight and so many things, Dan, so maybe people are more willing to go a little bit further afield, just because they're so desperate for certain things. I also wonder what all of this means for the third-party sellers on Amazon, which has been a big and increasing part of their business. Like, how does the whole pipeline work if they're trying to get their stuff out there today?

DAN HOWLEY: Yeah. The big thing for third-party sellers is-- and I was speaking to a couple of retail experts here-- they were saying that, if these companies aren't prepared for something like a Prime Day, then it could end up really hurting them actually. This is a finely-tuned machine that Amazon has here. If you go into Prime Day thinking that it's just going to be a big win for you, it's not. You need to have your inventory ready, you need to recognize that this is a chance to pull in customers for the long haul, and you need to make sure that what you're offering is unique and interesting enough. You can't be one of the hundreds of people selling X item that's exactly the same as the others.

So trying to make a race to the bottom, as far as pricing goes, will hurt you very badly on margins. You have to just make sure that you have something that, again, is unique, interesting, and something that is going to draw people in. Hey, maybe it's a pair of scissors. Who knows? It seems to be doing well on the site right now. But I do think for third-party sellers, it is kind of a winner-take-all almost. And they said last year they had $3.5 billion in sales. But they had close to $10 billion-- or more than $10 billion in sales overall.

And this year, we're expecting somewhere around $11 billion. I think for the third parties, a lot of it, also, will have to do with, can they get items to people in time? The whole idea of the pandemic hangover, as far as shipping things along those lines, is still going to affect some of these companies, and so they may run into issues here. There's also that pent-up demand for people to just get things that excite them. Right?

We're finally getting towards the end of this pandemic. We may see a lot more people shopping here. They're expecting this to be the largest Prime Day ever. It's really two days, but we'll call it Prime Day because why not. This could really lead to a backlog for some of these third-party sellers, and you have to wonder what that would mean for consumers who purchase through them.

MYLES UDLAND: Yeah. I might get a Kindle. I mean, it is a good deal. I haven't gotten a Kindle in, like, seven years. But yeah. I mean, now I'm doing the whole thing where I click those kitchen shears, Howley. Now my browsing history is just serving me six different kinds of scissors. I don't even want scissors, so it's a whole-- I'm in an algorithmic nightmare here on Amazon, as I think a lot of people are going to be over the next couple of days. All right, Yahoo Finance's Dan Howley with the latest on the first-- the beginning-- opening hours, let's say, of Amazon's Prime Day. A lot more coverage to come here on Yahoo Finance over the next few days.