Loyalty & Rewards

Prime Members Driving Amazon’s Sales Growth

How do you get consumers to spend more? Create a membership with perks like free shipping and video and movie streaming.

That’s what Amazon did and it seems to have paid off for the e-commerce giant that’s been struggling to post a profit during what CEO Jeff Bezos calls the “investment phase.” But we’ll find out Thursday (Jan. 29) just how much it’s paid off as that’s when Amazon reports its fourth-quarter earnings. While Amazon is typically shy about sharing too many numbers, new data from Consumer Intelligence Research Partners shows that Amazon Prime figures have hit new highs, including spending amounts for members versus non-members.

The data shows that Amazon Prime membership, which has hit 40 million, now spends an average of $1,500 a year, compared with $625 for non-members. Of its customer base, the figures show 45 percent of Amazon users are Prime members.

“Amazon Prime membership increased significantly in the holiday quarter,” said Josh Lowitz, partner and co-founder of CIRP. “Amazon announced that 10 million customers joined the program over the holidays, which is reflected in our estimate. So, Amazon grew Amazon Prime from an estimated 29 million members at the end of September 2014, on the strength of trial memberships started by holiday shoppers. And as we’ve shown earlier, Amazon Prime members spend more than other customers, on average shopping 50 percent more frequently, and buying more expensive items each time.”

The data also reveled some other interesting stats about Amazon customers. Data shows that 39 percent of Amazon customers in the U.S. own Kindle devices, but only 7 percent of Amazon customers own a Kindle Fire TV box or stick; less than 1 percent of Amazon customers own an Amazon Fire smartphone. The lack of Amazon Fire phone sales was a point of contention in the company’s third-quarter earnings when Bezos told analysts Amazon had $83 million in inventory of the phone left in its warehouse. But when it comes to their tablet business, data shows there’s a correlation between Amazon’s tablet owners and Amazon Prime memberships, which has helped drive sales. Amazon Kindle owners spend, on average, $1,450 a year, compared with the $725 average pricepoint for customers who do not own a Kindle e-reader or Fire tablet.

“Similar to Amazon Prime members, Amazon Kindle owners are better customers,” said Mike Levin, partner and co-founder of CIRP. “They also shop more frequently, and also buy more expensive items on average. It is too early to measure the purchasing propensity of Amazon Fire TV owners, and at this point there are far too few Amazon Fire phone owners to matter.”

Overall, Amazon also has seen more of its Amazon Visa cardholders venture into the Prime membership, which also encourages customers to shop more of Amazon because of the Amazon rewards associated with the credit card rewards. Amazon Visa cardholder participation has remained steady at around 15 percent of total U.S. customers, according to the CIRP report.

 

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