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Mar
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3.20.13 … guilty … the thing that has to scare the bejesus out of Amazon’s competition — is that it tends to cause subscribers to stop shopping anywhere else …

Amazon Prime, business models, TIME.com: guilty … I love the service and recommend it highly.  I do admit when I browse in a store, I force myself to buy something local, a gift or a card, but rarely books.

Last week, a report from Morningstar and Consumer Intelligence Research Partners (CIRP) estimated that there are now 10 million subscribers to Amazon Prime, which offers free streaming of thousands of movies and TV shows and, most important, free two-day shipping on most Amazon purchases. The service usually costs $79 annually, though it’s cheaper for college students ($39 annually, after six months free).

It’s unclear exactly how many Prime subscribers there are at any given time (Amazon doesn’t make this info public), but it sure looks like membership soared. It’s been estimated that there were fewer than 7 million subscribers at the start of 2012 and about 4 million members in the fall of 2011. The numbers have likely been boosted by Amazon including free Prime trials with sales of the Kindle tablet, but even so, the increases are impressive — and are presumed to keep occurring with regularity. The Morningstar report predicted that there could be 25 million Prime members by 2017.

The net result of Prime membership — and the thing that has to scare the bejesus out of Amazon’s competition — is that it tends to cause subscribers to stop shopping anywhere else. It’s assumed that Amazon’s prices are competitive. With Prime, shipping costs become a total nonissue. Subscribers automatically defer to shopping at Amazon first because they know shipping is free. And when they spot something they like at another retailer’s site or in a store (yes, it still happens), Prime members are likely to see if Amazon also sells the item. Chances are, Amazon does, the price is about the same or better, and two-day shipping is, of course, thrown in for free.

Sure, Amazon “pays” for all the shipping on Prime orders. A 2011 investigation estimated that the average Prime member used $55 worth of shipping and $35 in digital content annually. That’s $90 total, so Amazon was “losing” $11 annually by collecting its $79 membership fee.

Regardless of what might seem like a net loss, Amazon Prime has been and continues to be a hugely profitable enterprise for the e-retail giant. A Prime member now makes $1,224 in Amazon purchases each year, on average, compared with $505 for non-Prime customers. After factoring in costs incurred for shipping and streaming, the average Prime member yields Amazon $78 more in profits than other customers, according to Morningstar. Yep, it’s nearly equal to that $79 membership fee.

via How Amazon Prime Became More Successful than Anyone Imagined | TIME.com.


0 Responses to “3.20.13 … guilty … the thing that has to scare the bejesus out of Amazon’s competition — is that it tends to cause subscribers to stop shopping anywhere else …”



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