Amazon Prime’s US growth flattens – can it be replicated elsewhere?
Amazon’s Prime membership scheme has been wildly successful. Enthusiastic online shoppers can pay an annual flat fee to gain free two-day shipping on millions of items and access to the company’s streaming video on demand (SVOD) service, as well as other perks. In the US alone, where Prime grew by 8% over the last 12 months, there are now 97 million Prime Subscribers. But, according to researchers at CIRP, just 2 million of them were added in the last quarter.
Amazon’s share price has appreciated by 53% year to date
SOURCE: Yahoo Finance
CIRP partner and co-founder, Josh Lowitz, said: “Prime membership growth has clearly flattened. Amazon Prime membership has now spread far beyond the early adopters who were presumably the most committed Amazon shoppers.”
The bigger question, however, as Amazon looks to court online shoppers around the world, is whether they can replicate this success in other regions. If they can, then there is a fortune waiting to be made overseas. Amazon Prime customers spend more than double the average amount that an Amazon customer spends every year ($1400 and $600, respectively). The reason is simple: free shipping, streaming video, and other services pull users further into Amazon’s ecosystem, where they are exposed to the full breadth of Amazon’s services, and incentivised to buy more.
It’s simple logic: once you’re on Amazon Prime, you’ll spend more time with the company, watching shows, listening to music. You’ll see that Amazon stocks, for example, essentials. And then you’ll think: having paid for an entire year of free shipping, should I buy my batteries at the store, or make use of a service that I’m already paying for?
As Amazon continues its rapid expansion around the globe, the wholehearted embrace of its Prime membership scheme in the US should leave investors feeling very positive about its fortunes elsewhere.
Dominion holds Amazon in its Global Trends Ecommerce Fund.
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