Amazon Prime is popular, but in three-quarters of all US homes? That’s open to debate – USA TODAY
Amazon is holding a giant job fair and plans to offer thousands of jobs at nearly a dozen U.S. warehouses. Nearly 40,000 of the 50,000 packing, sorting and shipping jobs will be full time.
SAN FRANCISCOÃ‚Â Ã¢Â€Â” How big is Amazon Prime?Ã‚Â
One survey suggests three in four U.S. households are members, while others suggest it’s less than half. AndÃ‚Â Amazon isn’t talking.Ã‚Â
This week, research firmÃ‚Â Consumer Intelligence Research Partners released a figure of 90 million Prime membersÃ‚Â in the United States, which would be around 77% of the nation’s 116 million households, according to the U.S. Census.
Given that Prime members spend almost twice as much as non-Prime members, this bodes well for AmazonÃ¢Â€Â™s earnings in the third quarter, due next week.
TheÃ‚Â companyÃ¢Â€Â™s 12-year-old $99 membership program is certainly popular, offeringÃ‚Â free two-day shipping to all members and one-day and even two-hour shipping in some areas, in addition to a host of other perks including free streaming movies, e-books, music and photo storage.
No more wasted trips
ItÃ¢Â€Â™s clear Amazon Prime is a killer app when it comes to shopping. For an increasing number of items, it’s simpler for many people to just click and buy rather than go out searching for what they need.Ã‚Â
“Most of the time when we’re looking for something specific at a brick-and-mortar store, they don’t have it and we’ve wasted a trip,”Ã‚Â Prime shopper Kathy Ramsey said.
Annette Hurst recently found herself needing earring backs and was “thrilled” to buy them on Amazon in part because she didn’t even know where she could have gone to find them.
Prime’s size remains a matter for speculation.Ã‚Â
For example, aÃ‚Â survey of 1,000 household shoppers ages 21 and over by business intelligence firm Market Track found that 41% reported being Prime members. That would equate to about 104 million Prime members based on 2016 population figures from the U.S. Census.
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Amazon analyst Sucharita Mulpuru with Forrester ResearchÃ‚Â thinks about 50% of U.S. households have Prime, with the caveat that some, but not many, households may have more than one Prime member.
Being a Prime member doesn’t mean you only shop at Amazon.Ã‚Â A survey Forrester did in the last quarter of 2016 found that 25% of American consumers haveÃ‚Â shopped using Amazon Prime in the previous three months.
That compared with 60% of consumers who said theyÃ¢Â€Â™d shopped at Walmart.
To Mulpuru’s mind, no matter how popular Amazon getsÃ‚Â it won’t be AmericaÃ¢Â€Â™s largest retailer.
Ã¢Â€ÂœAs long as WalmartÃ¢Â€Â™s around, thatÃ¢Â€Â™s never going to happen,Ã¢Â€Â she said.
ThatÃ¢Â€Â™s in part because in the end, price trumps convenience for a substantial portion of the population. She points to e-books as an example.Ã‚Â When Amazon first started selling e-books it was able to charge a market-dominating price, and e-book sales shot up.
When publishers started setting prices and e-books become less price-competitive, “people went back to getting paper books,Ã¢Â€Â she said.
Still a small fish in a big retail pond
MoodyÃ¢Â€Â™s analyst Charles OÃ¢Â€Â™Shea believes PrimeÃ‚Â membership numbers are seriously overestimated. He did some number crunching and thinks U.S. Prime membership is probably closer to 50 million.
That puts it in about 40% of U.S. households. And he notes it’sÃ‚Â still a small part of overall retail spending. Walmart has about 10% of total U.S. retail sales, with autos and restaurants taken out. Ã¢Â€ÂœAmazon is maybe 2 to 3%,Ã¢Â€Â he said.
He seesÃ‚Â AmazonÃ¢Â€Â™s true competitive advantage not in Prime memberships but instead the willingness ofÃ‚Â stockholders to let the companyÃ‚Â invest and experiment without expectingÃ‚Â it to make a profitÃ‚Â Ã¢Â€Â” whichÃ‚Â gives it almost unmatched flexibility.
Ã¢Â€ÂœAmazonÃ¢Â€Â™s secret sauce is that it can spend billions and billions without the stockholders revolting,Ã¢Â€Â OÃ¢Â€Â™Shea said.
Other retailers donÃ¢Â€Â™t have that luxury. When Walmart said it was going to invest in online sales and price and focus less on profitability for a few years, Ã¢Â€Âœtheir stock took a huge hit,Ã¢Â€Â OÃ¢Â€Â™Shea said.
Growing market power
No matter how big Amazon Prime actually is, its growth isÃ‚Â worrisome to some because of the market power it gives the Seattle-based company.
PeopleÃ¢Â€Â™s behavior changes when they sign up for Prime. They buy more at Amazon than they did before. According to Consumer Intelligence Research Partners they spend on average about $1,300 per year, compared to about $700 per year for non-member customers.
At first itÃ¢Â€Â™s to maximize the value of the free shipping, but it quickly becomes so easy that they go straight to Amazon first.
Ã‚Â Ã¢Â€ÂœThe result is that Amazon is becoming an all-powerful gatekeeper. Companies that want to reach consumers increasingly have to use AmazonÃ¢Â€Â™s platform and play by its rules,” said Stacy Mitchell with the Institute for Local Self-Reliance, a non-profit based in Washington, D.C., that works on sustainable community development.
“This is bad news for competition, and itÃ¢Â€Â™s one reason regulators need to take a closer look at AmazonÃ¢Â€Â™s market power,Ã¢Â€Â she said.
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