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Amazon Prime Day could test the limits of the e-commerce giant’s swift delivery capabilities

With millions of shoppers expected to log on and check out during Amazon.com Inc.’s Prime Day shopping event, Moody’s questions whether the e-commerce giant’s delivery capabilities can keep pace.

Prime Day is taking place over 48 hours starting June 21 at 12 a.m. PDT  with deals for those looking to score a discount on everything from devices to kitchen appliances and more.

Prime Day will take place in more than 20 countries.

See: 5 of the best deals on TVs on Amazon Prime Day

Read: Consumers find shortages and higher prices as COVID-impacted supply chains shift for recovery

All of that clicking could clog the delivery pipeline. Moreover, a variety of retailers have reported backups as COVID continues to take a toll on the supply chain.

“As Amazon’s 48-hour Prime Day progresses, our primary point of focus remains the ability of the various components of its delivery network to handle what will be an unprecedented surge in volume, and whether the limits on this capability, especially when factoring in the volume that will be generated from competing retail promotions on UPS and the USPS, will create delays sufficient to ‘push’ consumers to those competitors and avail themselves of the various pick-up options,” said Charlie O’Shea, Moody’s vice president.

Numerator data shows that 56% of shoppers who know about Prime Day plan to shop it.

Amazon’s
AMZN,
-0.71%

Chief Executive Jeff Bezos said in January that the company had reached 150 million members.

JMP Securities estimates that Prime membership has now reached more than 200 million with members shopping more frequently and across more categories during the pandemic.

“Prime Day likely represents at least 10% of Amazon’s retail sales in the quarter based on multiple reports suggesting $11 billion-plus in spend over the two days this year,” said JMP analysts.

 JMP rates Amazon stock as market outperform with a $4,500 price target.

Amazon has an average buy rating and average target price of $4,274.13, according to 49 analysts polled by FactSet.

Also: 5 things NOT to buy on Amazon Prime Day

Shipping experts ShipStation says fulfillment is one of the top issues to watch during Prime Day this year.

“If demand exceeds supply — and it will, for certain items — what is the longest lead time of shipping/fulfillment that this consumer will reasonably allow to satisfy their demand?” asks Krish Iyer, head of industry relationships and partnerships at ShipStation.

Prime Day has also become a big event for retailers like Walmart Inc.
WMT,
+0.95%
,
Target Corp.
TGT,
+1.23%

and others that are hosting shopping events of their own. That will drive price competition.

And: 8 amazing deals Walmart is offering on Prime Day — from Apple AirPods Pro to air fryers to robot vacuums and more

Moody’s O’Shea will be watching to see whether “these competing promotions from the likes of Walmart, Target, and Best Buy
BBY,
+1.35%

cut into Amazon’s volume.”

He’ll also be on the lookout to see “how low will the pricing limbo-bar go in key categories such as consumer electronics and small appliances, both of which have been high-volume Prime Day categories.”

As life tiptoes back to normal after COVID-19, Prime Day marks the unofficial start to the back-to-school season.

“Back-to-school shopping is just one component of the general craving for social progression that will put tech, apparel, home, and smart home products at the forefront for Prime Days’ success this year,” said Marshal Cohen, chief industry adviser at NPD.

“It’s going to come down to what the consumer wants and needs right now.”

Amazon stock slipped 0.8% in Monday trading, but has gained 6.2% for the year to date

The Amplify Online Retail ETF
IBUY,
+1.20%

is up 9.3% for 2021 so far, and the S&P 500 index
SPX,
+1.35%

has gained 12.4% for the period.

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