Amazon continues to add more Prime members who end up spending more with the site, on average, than regular customers.
The latest analysis from Consumer Intelligence Research Partners (CIRP) pegs total U.S. Prime membership at 85 million, which is up 35 percent from the year-ago quarter and double from two years ago.
While quarterly growth is slowing, Amazon is still adding a substantial amount of new Prime members who end up spending $1,300 per year on average with the site, compared to $700 for non-members.
“Amazon Prime membership encourages much more frequent shopping, likely because the free shipping benefit knocks down a key barrier to buying online often and makes Amazon their first stop for online purchases,” noted Mike Levin, co-founder of CIRP.
CIRP also noted that 63 percent of U.S.-based Amazon customers are Prime members. CIRP estimates that 28 percent of members pay the $10.99 monthly fee for Prime that was introduced last year, as opposed to the traditional $99 yearly price.
For its study, CIRP surveyed 500 U.S.-based Amazon customers who made a purchase during April-June.
Prime is one of the main “pillars” of Amazon’s business. The online retail giant continuously adds new perks for members to induce more customers to sign up; free 2-day shipping, cloud storage, streaming media, and access to exclusive deals are just some of the benefits. Amazon CEO Jeff Bezos said last year that the company’s goal “is to make sure that if you are not a Prime member, you are being irresponsible.”
Amazon doesn’t publicly disclose the official number of Prime members.
Update, July 7: Some people aren’t convinced that CIRP’s study methodology is accurate. Michael Pachter, a research analyst for Wedbush Securities, told GeekWire that the study is “flat out wrong.” He also tweeted that the study was “lame.”
— Michael Pachter (@michaelpachter) July 7, 2017
I followed up with Pachter, who explained some of his math. He crunched numbers from Amazon’s reported “subscription revenue,” which, according to its most recent earnings release, totaled $7 billion over the last four quarters. That segment includes “annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video, digital music, and other subscription services,” according to Amazon.
Pachter estimates that Amazon has closer to 52.5 million Prime members in the U.S. Here is his math:
I have no idea what all of these other subscriptions total, but think it’s reasonable to say $1 billion (14% of the total). I may be wrong, but given that the other services ($2.99 for video, $9.99 for music, $15 per month for Fresh) add up to something, I presume it’s reasonable to round to $1 billion.
That leaves $6 billion for Prime. They charge $99 in the U.S., a bit more in the UK, around the same in Germany, somewhat less in France, and only $8 in India (per year!!!). I assumed an $80 average price, but again, could be wrong.
At $80, we arrive at 75 million GLOBAL members. We KNOW that total sales are 60% North America (which includes Canada and Mexico), and the company told me that U.S. Prime membership was above the average of all sales. I again assume 70% of Prime members are in the U.S. That leads me to conclude that the figure is 52.5 million.
I’m sure that all of my reasonable assumptions are wrong, and am happy to conclude that the U.S. figure could be 55 million or even 60 million. However, the source you cited said 85 million. Since the U.S. fee is $99, the subscription revenue from 85 million members would be $8.5 billion, and the number simply isn’t close to that.
Also note that the last two quarters were $2.1 billion and $1.9 billion, so it’s not like we’re at the $8.5 billion run rate. Keep in mind that covers ALL subscriptions, so even if the U.S. were 85%, we’d be looking at a number closer to $10 billion.