Big achievement by Amazon.com: persuading you to pay to shop
NEW YORK — Amazon.com is clearly entering its Prime. Meaning, of course, its $100 annual membership program, now a decade old, which has accomplished the remarkable feat of convincing millions of people to pay an annual fee for the privilege of, well, shopping.
Prime is now central to Amazon’s strategy of dominating the world of commerce. What started as a yearly fee for free twoday shipping now offers a sometimes bewildering array of perks, including household product subscriptions, one and two hour Prime Now delivery, streaming music and video, e-books, groceries (for an additional $200 a year), photo storage and more.
“Prime has become an all-you-can-eat, physical-digital hybrid,” Amazon founder and CEO Jeff Bezos wrote in his annual shareholder letter in April. He wants the service to be such a good deal that you’d be “irresponsible” not to sign up, he wrote.
Why the emphasis on Prime? Simply put, members of the loyalty program shop more frequently and spend more money, analysts say.
Prime shoppers helped drive Amazon’s surprise profit surge in the first quarter. Shares of the ecommerce giant jumped in after-hours trading Thursday after it reported a 28 percent jump in revenue, to $29.13 billion. Net income was $513 million, compared to a loss in the year-earlier quarter.
Amazon is a company that often flip-flops between showing profits and losses, depending on how aggressively it decides to plow money into big, new business bets. Investors have granted the company much wider leeway to do so than other technology companies of its size because of its history of delivering outsize growth.
For the time being, it has clearly chosen to produce profits.
Amazon doesn’t release detailed numbers on Prime, although Bezos wrote that Prime has “tens of millions” of subscribers. Wedbush Securities analyst Michael Pachter estimates there are about 50 million Prime members.
Even a 25 percent price increase in 2014, the only one for Prime in 10 years, hasn’t appreciably dampened enthusiasm for the program. Membership grew 51 percent last year, including 47 percent growth in the U.S., according to Bezos.
Pachter estimates that Prime members spend about four times what others do and account for about a third of all Amazon purchases.
Of course, Amazon Prime isn’t for everyone. Those that shop infrequently online won’t find the $100-a-year fee worth it. With an estimated 244 million registered Amazon accounts, a large majority of Amazon shoppers — roughly 80 percent, in fact — haven’t signed up yet.