Amazon May Have Reached Peak ‘Prime’, But They’re the Only Ones Who Know
The WSJ’s Greg Bensinger contributed to the baseless speculation about Amazon yesterday when he asked whether Amazon was "hurtling towards peak Prime".
The Seattle online retailer is estimated to have had 54 million U.S. Prime members at the end of 2015, up 35% from 40 million a year earlier, according to an analysis from Consumer Intelligence Research Partners. But the coveted customers appear to be spending less.
Chicago-based CIRP estimated Prime members spend about $1,100 on average per year, down from $1,500 per year in 2014. Non-Prime members accounted for about $600 in spending on average, compared with $625 the year prior.
And the rate of growth in signups slowed to 35% from 54% in 2014, according to CIRP’s estimates.
Still, those Prime members could have contributed to more than $5 billion in fees alone, assuming all of them pay the full $99-per-year price. (Amazon offers occasional discounts and a reduced rate for student memberships.)
For his next article, Bensinger will use a Ouija board to contact Steve Jobs and ask his opinion of the choices Apple has made since Jobs died in 2011. (I hope he has a fire extinguisher handy; Jobs was known for using strong language.)
Seriously, folks, it’s one thing to report an analysts estimates, but something else entirely to try to draw conclusions (or ask open-ended questions) about the company mentioned in the estimates.
The first is okay, but the latter is a mistake. Those estimates have nothing to do with the company; they are simply guesses made by an analyst and should be treated with the same care as unfounded hardware rumors.
image by hnnbz
Rasputin January 26, 2016 um 11:05 am
Can’t find a general contact link, so I’ll put it here. Coming to this news item caused a big enough increase in my CPU usage (about 10%) to activate my fan. Normally I don’t care, but when I’m running on battery that’s a show-stopper. I have disabled Ad-Block for your site, but if the ads make my fan whir, I might have to reactivate ad-block. Sorry. I’ll leave ad-block off for now.
Rasputin January 26, 2016 um 11:06 am
Just turned ad-block on and reloaded the page. CPU usage dropped by 10-15%…
Nate Hoffelder January 26, 2016 um 11:13 am
Thanks for the heads up. I monitor this closely, and I’m not seeing anything. I need to look further.
Rasputin January 26, 2016 um 11:16 am
I’m running Firefox 43.04.
Rasputin January 26, 2016 um 11:17 am
fjtorres January 26, 2016 um 12:13 pm
The drop in average spending by Prime members is easily explained and something Amazon obviously planned for since they raised the subscription rate as they added more features.
What is going on is that while Prime is at heart still a rewards program, it’s slate of digital "bonuses" is becoming worthy of subscription even to non-shoppers. This is particularly true of Prime Video with its highly rated video series and the new Amazon Studios movies.
Also, people who don’t fully exploit Prime’s free shipping are probably a profit center because they don’t cost Amazon any shipping fees.
Prime is simply too complicated a mix of services for the kind of calculation these analysts can perform; only Amazon has enough data to determine how much Prime contributes to the bottom line or what criteria it is judged by.
Fbone January 26, 2016 um 4:02 pm
If that 54 million number is accurate, that would mean almost half of US households have Prime membership. One out of two homes.
fjtorres January 26, 2016 um 7:21 pm
More like 40%.
Plenty of room to grow. 😉
Netflix is running around 36M in the US, 50M globally.
Cable is in 56M.
So Amazon Video has pretty good reach.
Fbone January 26, 2016 um 10:31 pm
The estimate still seems high. But then anyone can throw out a figure.
fjtorres January 27, 2016 um 8:33 am
The estimate is high but consistent with other WAGs over the years. The first TIME report on Prime, back in 2012, I think, had them at 30M. They’ve been consistently been estimated at 40M-plus since then and their video streamers (which rely on Prime) have been very popular over the last year. Add in the $50 tablet and the awards for their exclusive content and the growth in the non-shopping side of Prime can easily account for the 50M number.
More, even if Amazon isn’t quite at 54M, they soon will be: multiple Golden Globe winners and a dozen exclusive movies a year, mostly highly rated indie productions, along with a whole bunch of kid-friendly exclusive shows has made Prime Video a serious content distributor. Netflix is still number one but it is a matter for debate whether Hulu or Prime is number two.
The exact number is at best an educated guess but whatever the real number it will likely be closer to 50M than to 40M just because of the video. (Remember that when Amazon raised the price of Prime, Netflix raised theirs $2 a month.)
Fbone January 27, 2016 um 1:23 pm
Possibly. I don’t see those numbers going by my circle of family and friends, none have Prime. Perhaps, a different socioeconomic class.
fjtorres January 27, 2016 um 3:05 pm
Oh, Prime absolutely absolutely targets a very specific demographic. Think SAM’S CLUB and COSTCO rather than WalMart or Macy’s.
Their primary targets are dual employment families; the kind of time-constrained households that appreciate things like their grocery service, consumables by subscription, 5 minute shopping sprees at lunch hour…
So does Prime Video: track down a list of their exclusive shows and remember the pilots were crowd-curated. Those are not typical broadcast or cable shows. What they are is what Amazon core customers like and, boy, they are legion.