Study: Amazon Prime doubles in size in two years

BY Deena M. Amato-McCoy

The number of Amazon Prime members are on the rise.

An estimated 60% of Amazon customers are Prime members, a group that is comprised of roughly 80 million members in the United States, according to research from Consumer Intelligence Research Partners (CIRP). The study is based on responses from 500 U.S. shoppers who made a purchase at between January and March.

Prime members spend on average about $1,300 per year, compared to about $700 per year for non-member customers. The current membership figure compares to an estimated 58 million U.S. members at the end of the March 2017 quarter — an increase of 38% in one year, according to the report.

“Looking back, Amazon Prime membership doubled in the U.S. in two years,” said Josh Lowitz, partner and co-founder of CIRP.

“While slower growth is expected as it reaches natural limits, Amazon had a surprisingly strong quarter,” Lowitz said. “Membership grew 8% in the most recent quarter, compared to 7% growth on a smaller base in the year-ago quarter ending in March 2016.”

According to Amazon’s December 2016 financial release, the company reported $6.4 billion in worldwide “retail subscription services.” This includes Amazon Prime fees and various forms of digital media subscription fees.

“While it’s tempting to use the newly released services figure to estimate Amazon Prime members, it does miss a couple of important factors,” said Mike Levin, partner and co-founder of CIRP.

“First, between 5%-10% of Amazon Prime members don’t pay the standard fee or at all for their membership because they are within the 30-day free trial period, or because they take advantage of Amazon Student or other similar reduced-fee programs,” he said. “Second, Amazon’s accounting for Prime membership fees spreads the fee over a full year, and recognizes only a portion of the $100 fee each month, so partial year members further distort the equation. In this way the $6.4 billion figure does not reflect a year of revenue from each Prime member.”

Based on this criteria, CIRP estimates that 26% of Amazon Prime members have elected to pay monthly for a membership, instead of annually. Since April 2016, Amazon offers Prime members the option of paying $10.99 per month instead of $99 per year.

“The monthly payment plan proved attractive, even thought it costs more than the annual plan,” added Lowitz.

“We think that the monthly membership option appeals to the later Prime adopters, with a smaller, potentially temporary commitment, that ultimately yields a long term commitment,” he said. “With smaller dollar, single month decisions, the new plan winds up helping with retention rates, which already average 85% for a member renewing after their first year.”


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