Amazon’s ‘Prime’ Push Abroad

Amazon has one clear bread-and-butter service that, even during tough quarters, has given it a boost. That service, of course, is Amazon Prime.

And by the looks of Amazon’s sales, which have doubled in the past three years and continue to soar each year, Prime is drawing in new customers at a fairly steady pace. But abroad? Amazon’s revenues in regions like the U.K. aren’t growing quite as fast.

While they’ve grown 40 percent in the last three years, that’s still 10 percent lower than what Amazon is managing to do in the States. To close that gap, Amazon is looking to put more of its eggs into growing the Amazon Prime basket in its international markets.

Amazon Prime has existed in the U.S. for 11 years but has only more recently begun to focus on growing its other markets. That focus has included increasing its free, two-hour grocery delivery in the U.K. In the U.S., analysts project that roughly 25–40 percent of households have a Prime subscription. Some estimates peg Prime membership in the U.S. as high as 54 million.

Amazon has publicly revealed that its Prime membership grew 51 percent in 2015 but never gave figures for what that growth was from to give it context.

“Amazon is very intent on growing the Prime membership, in large part to lock in the customers, to habituate that customer to making Amazon your first eCommerce destination,” Youssef Squali, an analyst at Cantor Fitzgerald, told Financial Times. “Once you subscribe, the frequency of orders goes up significantly.”

Prime is available in six European countries, but offerings vary by nation. And that’s perhaps why Amazon knows to grow Prime; it needs to make the perks universal across the regions it’s in. Amazon’s largest international markets are Germany, the U.K. and Japan, which make up a majority of its sales abroad.

We also know that, on average, Prime members spend more with Amazon than non-Prime members (which is expected), but we don’t know how much those Prime members are converting searches to purchases. Well, a report from Millward Brown Digital estimates that when compared to non-Prime members, Amazon’s most “Prime” customers are converting those purchases 74 percent of the time, Internet Retailer reported.

In contrast, that compares to non-Prime members’ estimated conversion rate of 13 percent. Its most recent research also suggests that Prime members’ conversion rate is 22 times higher than the typical eCommerce conversion rate in the U.S.

Millward Brown Digital’s research in April showed that that same figure was at 63 percent, showing that, as Amazon grows its Prime membership, it’s also likely managing to increase its conversion rate. The study also showed that Prime members who turn to other online retailers are not having the same conversion rates elsewhere; those same customers are only converting on non-Amazon purchases 6 percent of the time.

And that’s a little why Amazon is probably banking on its strategy to push Prime further abroad.