Content Delivery Win: Amazon Prime Members Spend 2x More

Amazon has yet to reveal just how many subscribers it has on Amazon Prime, its subscription-based service.  But thanks to a recent report, we have an idea.

Amazon Prime has about 10 million subscribers, according to Morningstar analyst R.J. Hottovy and surveys conducted by the Consumer Intelligence Research Partners.  Amazon’s premium customers enjoy free two-day shipping on Prime items, and the unexpected perk of  instant movie and TV streaming.  There’s also access to Kindle Books, where you can borrow or purchase e-books.  It’s quite a consumer service, spanning seemingly unrelated needs in both online and offline environments.

When first introduced, Amazon Prime had a slow start.  Consumers saw it as just another online streaming service to compete with Netflix.  For $7.99 a month or $79 a year, the price for such an oddly-packaged service could be off-putting, but things started to change when Amazon started offering a 30-day free trial.   Then to boost this Smart App, Amazon expanded its offerings with a partnership with Viacom, making programs on MTV, Nickelodeon and Paramount Studios available to Prime subscribers.

It’s a compelling revenue stream for Amazon, which has a way of easily monetizing an extremely wide range of products and digital services.  Because of its free two-day shipping, more Prime members do their shopping on Amazon.  Primer members spend twice as much as non-members, $1,224 a year compared to $505.

“We believe the appeal of Amazon Prime is undeniable, as it adds expedited shipping to Amazon’s already powerful combination of low prices, a wide selection of products, and unrivaled customer service,” Hottovy wrote. “Just as important, we believe Prime strengthens Amazon’s network effect, as the explosive growth in Prime memberships the past few years entices merchants (including third-party sellers on the platform and wholesalers/manufacturers selling directly to Amazon) to offer a greater number of Prime-eligible merchandise.”

According to Hottovy’s research, Amazon made $78 per Prime member in 2012.  With the huge profit Amazon is making in its Prime members, some believe that the service’s price may soon be lowered to entice more to sign up for the service, and in turn gain more people to shop on Amazon.  Hottovy added that Amazon is starting to encroach on merchant’s territory such as Target, Kroger, and Walmart, thanks to its practical but always-surprising versatility.