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The government's retail sales number, after popping in June, was mysteriously flat in July — and some of that might be because of Amazon.com and its Prime Day.
Consumers continued to spend online, but the July retail sales number was flat in part because of the sharp percent drop in gasoline prices, which reduce sales at not only gasoline stations but at the likes of Costco and Walmart. There was also a general lack of sales at brick and mortar stores in apparel, electronics, and general merchandise.
Online shopping shows up in the non-store retail sales category, which rose 1.3 percent in July or 14.1 percent year over year. That category includes catalogs and infomercials, but it's largely online sales. Since online shopping is also mostly Amazon.com, it's safe to say that Amazon's self-proclaimed Prime Day holiday was a big part of the retailer's — and overall — online sales last month.
Retail sales were flat even though they were expected to rise 0.5 percent in July. Excluding automobiles, sales were expected to rise by 0.1 percent, but instead they fell 0.3 percent. June's overall retail sales meanwhile were revised higher to a gain of 0.8 percent, so there is also some speculation that there was some payback in July.
But economists, in trying to explain the sudden drop, highlighted the continued robustness of online sales versus the long-time trend of decline at traditional stores.
"I think you could certainly say there's a Prime bounce in July," said Paul Hickey, co-founder of Bespoke. Last July, there was a similar 1.3 percent increase in non-store sales.
Amazon said its Prime Day holiday July 12 was its biggest sales day ever, and it said worldwide orders were 60 percent higher than the first Prime Day last year. In the U.S., orders rose by more than 50 percent from last year. In order to participate in the sales day, created originally to celebrate Amazon's 20th birthday, customers had to join the Prime premium service.
How much Amazon's one-day sale took away in revenue or compressed margins at brick-and-mortar stores is unclear, but estimates for Prime Day sales ranged from about $500 million to upwards of $1 billion.
"I've got to believe a large chunk of that has got to stem from Amazon Prime Day," said Ken Perkins, president of Retail Metrics. "As they move more and more toward same-day and one-hour deliveries it's going to be really difficult to compete with that."
Hickey said the declines in apparel, electronics and general merchandise at brick and mortar stores line up with the areas where Amazon is strong. It's also not clear whether consumers would have held off on purchases while they waited to see what was on sale on Prime Day, touted as a sort of Black Friday in July.
"The categories that saw increases were autos, furniture and health and personal care. Those aren't Amazon categories. Every category that is Amazon-related saw a decline," said Hickey.
Hickey said the gap between growth in online sales and total retail sales is the greatest its been since 2000.
Diane Swonk, CEO of DS Economics, said Prime Day could be a factor in the sales results in July. She said the PPI report Friday showed a compression of margins that hit clothing, jewelry and apparel retailers hard. She said the same trend was reflected in the earnings of retail chains in their earnings reports this week.
Swonk said it's hard to say how much, but there may have been some discounting by store merchants hoping to lure in customers who have increasingly moved to online purchases. Prime Day may have had its own allure while shoppers watched for reduced prices.
Swonk, in a note, said the report could "Suggest Prime reallocated sales during the month but didn't break the general trend of online rising relative to overall sales."
"The share of online sales did rise a lot during the month, largely because of weakness that was exacerbated with big discounts and the drop in gas prices on nominal sales volumes," she wrote.
She does not believe the retail sales reports necessarily signal a big weakness in consumers. "The consumer hasn't fallen off a cliff. The consumer got good discounts," Swonk said.
Swonk discussed her own change in shopping habits. "I bought almost everything my son needed to go to college and for his dorm room online this year, which saved me at least three full days of the non-stop shopping I did with my daughter when she first went to college three years ago," she wrote.
Perkins said it was "astute" of Macy's to hop onto the trend with its Black Friday in July sale. Macy's this week announced the shuttering of 100 stores.