Amazon filing hints Prime members top 65M worldwide
Sales of Amazon's retail subscription services (including worldwide annual and monthly fees from its Prime membership program as well as audiobook, e-book, digital video, digital music and other subscription services) reached $6.4 billion last year, up from $4.45 billion in 2015 and $2.8 billion in 2014, according to a form 10-K filing with the Securities and Exchange Commission for fiscal year 2016.
Net sales from the e-commerce giant’s retail third-party marketplace, including commissions, related fulfillment and shipping fees, and other third-party seller services, reached $23 billion last year, rising from $16.1 billion in 2015 and $11.7 billion in 2014.
Net sales of “retail products,” which Amazon says includes product sales and digital media content sold on a transactional basis, reached $91.4 billion in 2016 compared to $77.9 billion in 2015 and $68.5 billion in 2014.
Crunching the numbers in this 10-K filing offers substantial clues into Amazon’s runaway growth and its Prime membership numbers, a notoriously murky figure that Amazon has never officially revealed. That’s led to a guessing game from a number of analysts in recent years.
More than half of Amazon shoppers across the U.S. have signed up for Prime membership, according to estimates from Consumer Intelligence Research Partners released last year. Prime membership in the U.S. increased to 63 million by the end of June, up from 44 million at the same time last year, representing 52% of Amazon's total American customer base, CIRP noted in that report.
Prime membership is growing fastest among wealthier households: More than 70% of households with annual incomes topping $112,000 have a Prime membership, according to Deutsche Bank. In addition, 75% of Prime members convert when visiting the Amazon website, compared to 13% of non-Prime members, Millward Brown Digital estimates in a mid-2015 study. In addition, Prime members buy from Amazon more than three times each month on average, compared with two times a month for non-members, and bring the company 80% higher profit than non-subscribers, according to Cowen & Co. analyst John Blackledge.
That explains Amazon’s seemingly neverending efforts to make Prime attractive to shoppers, through its free two-day shipping on many items, same-day delivery in many areas and perks like streaming video, music, photo storage, and other bonuses. (In his annual letter to shareholders last year, Amazon founder and CEO Jeff Bezos put it this way: “We want Prime to be such a good value, you’d be irresponsible not to be a member.”)
It's working. Based on data in this latest 10-K filing and operating under the assumption that Prime services revenue accounts for 90% of Amazon's retail services subscription revenue, Morgan Stanley analyst Brian Nowak estimates there are now 65 million Prime members worldwide, according to a Business Insider report Tuesday. TechCrunch calculates the number could be closer to 70 million, in light of Amazon’s recent Prime push into Asia, adding that retail subscription revenue from Prime could in fact top 90%.
Despite the small wedge that non-Prime sales appear to represent, Wal-Mart Stores Inc. seems to believe that there’s plenty of room to vie for that section of Amazon’s customer base, however. Wal-Mart last month ended its Amazon Prime-like ShippingPass membership program, which gave members free two-day shipping on most orders for a $49 annual fee. In its place, Wal-Mart now offers free two-day shipping to all customers purchasing orders over $35 (down from its previous $50 threshold), while shipping to stores will be free on eligible orders. Keith Anderson, vice president of strategy and insight at e-commerce analytics firm Profitero, compares that philosophy to catering to cable television customers who would rather pay ala carte than pay for a slew of channels they don’t want.
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-K - Amazon
- Business Insider Amazon just shared new numbers that give a clue about how many Prime members it has
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