How loyal are Ama­zon Prime mem­bers?

USA TODAY US Edition - - MONEY - John Max­field

One of Ama­zon’s ma­jor long-term ini­tia­tives is to grow the mem­ber­ship of its Prime pro­gram, which gives sub­scribers a va­ri­ety of perks, from free ship­ping to stream­ing videos and mu­sic, in ex­change for an an­nual fee.

The com­pany has al­ways been tightlipped about the num­ber of Ama­zon Prime mem­bers it has. Cur­rent es­ti­mates point to 65 mil­lion, with one es­ti­mate at putting it at 90 mil­lion.

Re­gard­less of the pre­cise num­ber, one of Ama­zon’s chal­lenges now is not just to at­tract new Prime mem­bers, but also to make sure its ex­ist­ing ones stick around from one year to the next. Its suc­cess at that is mea­sured by its mem­ber­ship re­newal rate.

No sur­prise, the com­pany doesn’t share the re­newal rate of Ama­zon Prime mem­bers ei­ther. How­ever, a re­cent sur­vey of 1,000 Ama­zon Prime mem­bers found that 74% of them planned to re­new next year. That may seem high, as it is a com­fort­able ma­jor­ity, but it pales next to the low churn of a com­pany like Costco, which claims a mem­ber­ship re­newal rate of 90%.

Truth be told, Ama­zon’s re­newal rate is prob­a­bly higher than the sur­vey sug­gests. That’s be­cause Prime mem­bers are en­rolled in au­to­pay by de­fault. As a re­sult, it’s not un­rea­son­able to think that a healthy share of mem­bers who might have left if forced to think about it ac­tively will re­new sim­ply out of in­er­tia.

John Mackey, CEO of Whole Foods Mar­ket, an Ama­zon sub­sidiary, is a mem­ber of The Mot­ley Fool’s board of di­rec­tors. The Mot­ley Fool owns shares of and rec­om­mends Ama­zon. It rec­om­mends Costco Whole­sale.

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