Back-to-school season has arrived, and it's clear that Amazon sees the younger generation as a required "get" to maintain its record growth. But what does this mean if the impending recession hits?
The recent yield curve inversion has spooked the marketplace and shows warning signs that a recession may be coming. Still, Amazon knows the investment today will pay off tomorrow.
More than previous years, Amazon's marketing efforts prior to Prime Day revolved around recruiting students. It rolled out a one-stop college store with featured picks from influencers like Ava Philippe.
It live-streamed a Prime Day concert headlined by Taylor Swift and other musical acts tailored for the Gen Z audience. And post-Prime Day, Amazon doubled down on its efforts with a series of digital and TV spots promoting a Back to School campaign.
On top of the marketing spend, Amazon provides significant incentives and discounts to students, if not more than its competitors. Amazon Prime Student offers a six-month free trial, including two-day free shipping and Prime video with a $6.49-per-month rate post-trial (67% savings vs. standard one-year plan).
Amazon also offers exclusive discounts like Amazon music unlimited for just $0.99 per month, 40% off Echo devices, and three months of Kindle unlimited for free to students -- not to mention that 40 colleges feature Amazon Campus, an on-site location that allows for easy pick-up of products, custom brand events, and free samples in a seamless experience for students.
This raises the question of whether current students are being spoiled with these incentives. One doesn't need to look further than the darkened windows of many brick-and-mortar retailers to see that it's a slippery slope.
Still, the big difference for Amazon is that students expect to pay more post-graduation, and Amazon is banking on them not being able to live without the convenience it offers.
The value of this investment is not without precedent. When I was in college, Amazon was pretty much just a bookstore and didn't offer any incentives to students beyond discounted textbooks. I even paid for shipping.
My first purchase on Amazon was in 2005, and I wanted to save on required reading. The rates Amazon offered were significantly better than in the on-campus bookstore and I was luckily able to find two books that semester to save money: Hot Text: Web Writing that Works and Earth: Portrait of a Planet.
The next year, I bought five required reading textbooks through Amazon, and by 2007, I started making purchases beyond the bookshelf. I graduated that year and was lucky enough to secure a job before the recession hit shortly after. Despite my good fortune, I was clearly in a money-saving mindset based on my Amazon purchase history, which is completely blank during that time.
The economy started to pick up again just as Amazon started to expand its marketplace, making it a natural progression for me to sign up for a Prime membership and continue to buy down the line. As a New York City resident, Amazon deliveries also made my life a little easier by allowing me to have gifts and household items delivered directly to my doorman instead of lugging them around the city myself.
Customers like me who began ordering back in school are loyal, even if they don't spend heavily in the early days of their careers. If Amazon continues to service us well for shipping, add more value and content to our existing benefits, and doesn't impose large increases in the annual cost, we won't leave it.
Going back to the basics and recruiting current students just like it got me is a smart play, and there's a strong likelihood that Amazon will keep them — younger customers don't have the same hesitation that we did before the initial iPhone launch.
If the current student population has trouble getting jobs post-graduation, their Prime Student accounts will lapse and the likelihood of continuing with a Prime membership at a higher cost is grim.
Discretionary spending is the first to be cut when there is a recession, as shown by my personal account history. That said, once the economy picked back up, I began purchasing the same brands that built relationships with me prior to the economic downturn.
Amazon's play is to build this relationship based on its potential lifetime value, and once it has students' profiles within its database, it can continue to advertise to them and track their milestones post-graduation.
Ultimately, their relationship with Amazon is bound to bloom once their career advances and the economy inevitably picks back up.