Amazon Prime could be free for everyone in the future
14th Mar 2013 | 00:52
Memberships equal loyalty
Amazon Prime members may not be part of very exclusive club in the future, but that might not matter much because the two-day shipping service could be cheaper or even free one day.
The reason behind this is Prime members are more likely to use Amazon as their go-to store thanks to the benefits of convenience of fast shipping and the ability to stream movies.
On average, Amazon Prime members spend twice as much as regular customers annually, according to Consumer Intelligence Research Partners' (CIRP) calculations picked up by Wired.
Breaking it down even further, Prime members account for $78 (around UK£52, AU$76) more in profit when you subtract Amazon's shipping and video streaming expenses, said Morningstar analyst R.J. Hottovy.
That's pretty much the cost of an Amazon Prime membership, which is $79 per year for everyone who can't get the student discount.
The future of Amazon Prime
Growing from 7 million to 10 million members in the 2012 fiscal year, Amazon Prime has "hit on a means of creating some very, very valuable customers," said CIRP partner Michael Levin.
"They're starting to encroach on the territory of general merchants and grocery stores," said Hottovy. "I think that's the next frontier."
Sure enough, Amazon is using deals like Subscribe & Save to deliver everyday items like food and household products to customers on a routine basis.
The retailer even has a deal in which customers can receive a 15 percent discount on their Subscribe & Save orders when five or more items are ordered within one month.
The pace at which Amazon Prime has been growing could continue, with the analysts predicting that the total number of memberships could reach 25 million by 2017.
By then, as the online retailer adjusts its strategy for customer loyalty, Amazon Prime could cost very little or absolutely nothing.