Louis Columbus — March 24, 2018 — March 24, 2018
- 70% of Americans with incomes of $ 150,000 or more who shop online have Amazon Prime memberships.
- Amazon Prime international customers will grow at a 56% compound annual growth rate (CAGR) between 2016 to 2018.
- Amazon shipped more than 5 billion items in 2017 with Prime worldwide.
- By 2022 there will be 56 million Amazon Prime Video subscribers in the U.S., and 122 million worldwide.
Net Sales at Amazon reached $ 177.9B in 2017, a 31% increase from $ 136B in 2016 and Net Income increased from $ 2.4B in 2016 to $ 3B in 2017. Their fourth quarter, 2017 financial results are available here. Their latest financial results also reflect how increasing operating expenses are squeezing margins as the company builds out their fulfillment network in international markets, technology, content, and marketing efforts.
Amazon Prime is an annual membership program that includes unlimited free shipping of over 100 million items, access to unlimited instant streaming of thousands of movies and TV episodes, Alexa voice shopping, unlimited free access to thousands of Kindle books and content. Amazon Prime also includes free same day delivery on selected products, in addition to planned services Amazon is fine-tuning for launch later this year.
Revenue for online subscriptions to services like its Amazon Prime membership, Audible, Prime Video, and Prime Music Unlimited was up 49% year over year, handily outpacing the 20% year-over-year revenue growth from its online store segment. In January 2018 Amazon raised the price for Prime membership $ 2 to $ 12.99 for customers making monthly payments, totaling $ 156 per year. Amazon chose to leave the Prime membership price at $ 99 for those customers choosing to make one annual payment. Investment firm Cowen & Company estimates the $ 2 price increase to Prime subscribers who pay monthly will generate an additional $ 300M in revenue.
The following ten charts provide insights into Amazon Primes’ explosive growth:
- 51% of U.S. households will be Amazon Prime subscribers in 2018, up from 45% in 2017 with Prime subscribers spending up to 4.6X more than non-prime customers. Morgan Stanley estimates that the average Amazon Prime customer spent $ 2,486 over the last twelve months compared to $ 544 for non-Prime Amazon customers. Source: Amazon Disruption Symposium Where so Far? Where to Next? Who is Safe?, Morgan Stanley, September 18, 2017. (PDF, 88 pp., no opt-in).
- There are an estimated 90 million paying Amazon Prime subscribers in the United States today according to Consumer Intelligence Research Partners and Statista. Amazon was able to grow Prime memberships from 63 million in June 2016 to 90 million in September of last year. From just 25 million members in December 2013 to 90 million in September of last year, Amazon has been able to attain a 29.2% CAGR of subscribers over the last five years. Statista found that Amazon Prime members spend an average of $ 1,300 per year compared to non-Prime members who spend $ 700 annually. Source: Statista.
- 70% of Americans with incomes of $ 150,000 or more who shop online have Amazon Prime memberships. Alexa, Echo, Dash, IoT, Smart Home and Prime Now delivery services are predicated on attracting and retaining Prime customers who have higher disposable incomes and are willing to pay for convenience. Amazon realizes the most profitable Prime customers they have are facing a continual time shortage due to demanding jobs and travel schedules. The Prime services roadmap continues to reflect convenience and speed to serve high-income families, many of which have two wage earners, where time is at a premium. Source: Statista.
- 46% of Amazon Prime subscribers buy something online using the benefits of their subscription at least once a week. In contrast, only 13% of non-Prime Amazon shoppers make weekly purchases. Amazon’s proliferation of services helps to keep Prime customers coming back. Combining a broad services portfolio and real-time convenience on a trusted platform, Amazon has found a way to become indispensable to customers who have high disposable incomes and little extra time. Source: Nearly Half of US Households Are Now Amazon Prime Subscribers, eMarketer Retail. January 30, 2018.
- Amazon Prime international customers will grow at a 56% compound annual growth rate (CAGR) between 2016 to 2018, growing over two times as fast as the S. Prime customer base while expectations of shorter delivery times increase. Morgan Stanley estimates there will be 62 million U.S.-based Amazon Prime customers by the end of 2018, growing from an estimated 54 million in 2017. International Prime subscribers are projected to grow from 18 million in 2018 to 45 million in 2018. Source: Amazon Disruption Symposium Where so Far? Where to Next? Who is Safe?, Morgan Stanley, September 18, 2017. (PDF, 88 pp., no opt-in).
- By 2022 there will be 56 million Amazon Prime Video subscribers alone in the U.S., and 122 million worldwide. Within four years it’s projected that Amazon Prime Video will grow its customer base globally to 122 million subscribers, with 45.9% from the U.S. alone. Amazon’s Source: Statista.
- Amazon Prime Video is the primary growth catalyst for Amazon to gain new subscribers in Japan, Germany, and the UK. Amazon Prime membership jumped 16% in Japan in just three months following the launch of Prime Instant Video. Prime subscriber rates increased in the UK and Germany with the introduction of Prime Instant Video. Source: Amazon Disruption Symposium Where so Far? Where to Next? Who is Safe?, Morgan Stanley, September 18, 2017. (PDF, 88 pp., no opt-in).
- 63% of Amazon online shopping users are also subscribers to Amazon Prime today. Gaining new Prime subscribers from existing online users have started to slow down compared to other areas of Amazon Prime growing at double-digit growth rates. Amazon’s strategy of broadening the base of services and devices including Alexa to attract new subscribers shows signs of working according to their latest financial results. Source: Statista.
- Amazon Prime has 3.4 times the number of customers acquired Whole Foods Market has and is changing the pricing and profitability of food retailing now. Amazon is actively re-ordering the food retailing landscape by capitalizing on the scale of their operations in the supply chain, logistics and fulfillment operations. Morgan Stanley found that the primary reason customers aren’t shopping at Whole Foods Markets is the perception of lower prices elsewhere. Amazon’s selective reduction of prices at Whole Foods Markets is margin-driven today. Source: Amazon Disruption Symposium Where so Far? Where to Next? Who is Safe?, Morgan Stanley, September 18, 2017. (PDF, 88 pp., no opt-in).
- Amazon is combining Prime Now 1 to 2-hour deliveries and Whole Foods Market local inventory to fuel and scale a profitable grocery delivery business. One of the most attractive benefits of Prime membership is the flexibility of ordering products for 1 to 2-hour By increasing the variety of products deliverable by the Prime Now service, Amazon is scaling its home delivery business profitably. Source: Amazon Disruption Symposium Where so Far? Where to Next? Who is Safe?, Morgan Stanley, September 18, 2017. (PDF, 88 pp., no opt-in).
Data Sources on Amazon Prime and their latest reported financial results:
Amazon Disruption Symposium Where so Far? Where to Next? Who is Safe?, Morgan Stanley, September 18, 2017. (PDF, 88 pp., no opt-in)
Amazon has around 80 million reasons to be excited for Prime Day, Business Insider. July 10, 2017
Amazon hikes the price of Prime monthly memberships by 18%, CNN, January 19, 2018
Amazon nipping at Netflix’s heels, IHS Markit, January 16, 2018
Amazon Prime Had A Ridiculously Good 2017, Slash Gear January 2, 2018
Amazon Prime had its best year of sign-ups ever, Quartz, Alison Griswold.
Amazon Prime Hits 90 Million US Members, Consumer Intelligence Research Partners, October 18, 2017 (PDF, 22 pp., no opt-in)
Amazon Prime’s Monthly Price Hike Will Generate $ 300 Million a Year, Bloomberg & Company, January 22, 2018
Don’t Overlook These Metrics From Amazon.com, Inc.’s Fourth Quarter, NASDAQ. February 10, 2018
For the wealthiest Americans, Amazon Prime has become the norm, Recode, June 8, 2017
Here’s How Much Amazon Prime Customers Spend Per Year, Fortune, October 18, 2017
Nearly Half of US Households Are Now Amazon Prime Subscribers, eMarketer Retail, January 30, 2018
Number of Amazon Prime Video subscribers worldwide in selected countries in 2022 (in millions), Statista, 2018.
Pros and Cons of Amazon Prime, Consumer Reports, February 22, 2018
Sixty-Four Percent Of U.S. Households Have Amazon Prime, Forbes, June 17, 2017
Why Amazon Bought Whole Foods, The Atlantic, June 16, 2017
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