Amazon.com is the leading eCommerce retailer in the U.S. with 34 percent market share, but that is expected to grow even more, hitting 50 percent by 2021.
That’s according to Needham, the Wall Street firm that said in a research report Monday (April 10) that Amazon’s dominance in eCommerce will only get larger. Needham raised its rating on Amazon’s stock to buy from hold and set a price target of $1,100 on the stock.
“We believe Amazon’s established dominance in the U.S. is sustainable with Prime, mobile penetration and third-party growth,” Needham analyst Kerry Rice wrote in the note, according to a report.
So what’s behind Amazon’s strong growth? Its Prime membership program that offers subscribers free two-day shipping for a year after they pay $99. Amazon had around 65 million Prime members in 2016, according to Consumer Intelligence Research Partners. That’s more than double what it had two years earlier, noted the report. What’s more, those Prime customers are much more active and loyal as they try to capitalize on their $99 investment. Meanwhile eMarketer finds 80 percent of Prime members purchase on Amazon.com at least once a month. Then there is Amazon’s shopping app, which is helping the company move online sales from a desktop computer to a mobile phone. Digital sales are forecast to increase 13 percent overall, up from 8 percent in 2012, presenting a big opportunity for Amazon, noted the report.
Amazon appears to be well aware of the power it has with Prime. In January Amazon tapped Jamil Ghani, Target’s SVP of strategy and innovation, to head up the Amazon Prime membership business outside of the U.S. According to a Recode report that cited a person briefed on the move, Ghani will report to Amazon VP of Amazon Prime Greg Greeley. The report noted that Ghani was a rising star at Target, coming up with new ways for the retailer to grow in a market that is being disrupted by Amazon. At Target, Ghani reported to Target Chief Strategy and Innovation Officer Casey Carl and led a team of 150.
For Amazon, the move underscores the growing importance of Prime outside the U.S., given analysts are predicting Prime in the U.S. will slow during the course of the next few years. The report noted that analysts estimate close to half of all households in the U.S. subscribe to Prime. As a result, Amazon has been expanding the Prime service, announcing the launch of Prime in India and in China.