Report: Amazon Prime used by 70% of upper-income households
Half of all households in the United States are Prime members, up from about 35% two years ago, according to new research from investment firm Piper Jaffray. Prime membership is concentrated (and growing fastest) among wealthier households—more than 70% of households with annual incomes topping $112,000 have a Prime membership, Business Insider reports.
Amazon doesn’t release these kinds of numbers, except to say that its membership is in the “tens of millions,” so it’s up to other entities to crunch the numbers. But Piper Jaffray’s report jibes with earlier ones: Earlier this year Consumer Intelligence Research Partners said its data shows the number of Amazon Prime memberships rose 35% in 2015 to 54 million, or nearly half of all U.S. households.
And Cowen and Co. last year found that Prime members have an average household income of $69,300, well above that of non-Prime Amazon shoppers, 24.8% higher than that of Wal-Mart shoppers, and 4% above that of Target shoppers. Prime members are, on average, 36.5 years-old, about the same as Target shoppers, and younger than Wal-Mart’s on-average 42 years.
Amazon’s Prime membership is a retailer’s dream: a good portion of wealthier Americans have already shelled out $99 (each year) to belong, and so are more likely to shop there. Indeed, research shows that Amazon’s Prime members are extremely sticky. Nearly three quarters (74%) convert compared to 13% of non-Prime members, according to a study last summer from Millward Brown Digital. That study estimated that half of all U.S. households would be Amazon Prime members by 2020, something that’s already been reached already if the Piper Jaffray and CIRP numbers are to be believed.
That explains much of Amazon’s behavior, too. While many view Amazon's speedy same-day Prime Now delivery, free two-day shipping, and summertime “Prime Day” sale as tools to beat its competition, they may just be a way to attract and build its Prime membership program, experts have told Retail Dive.
Prime Day was slammed on social media last year for disappointing or sold-out deals, yet Amazon Prime VP Greg Greeley declared victory, noting that "hundreds of thousands" of new Prime members signed up, and that the company would be doing it again.
“I think this is a real fantastic way for Amazon to make hay during the dog days of summer, that lull in retail between Father’s Day and ‘back to school,’” Rob Garf, a retail strategist with cloud-based e-commerce platform company Demandware, told Retail Dive last year. “This provides a way for Amazon to drum up demand and increase their Prime members. I could have reversed those — the major reason is not necessarily sales but to attract new customers.”
And that seems to be the reason that Amazon does a lot of things. Those disappointing deals could be seen as an indication that Amazon is less interested in competing on price. The perks that Amazon Prime members enjoy—the delivery and shipping and entertainment streaming services—are going far in keeping those customers at Amazon.
One question for Amazon, though, is whether there’s a point when those costs start to matter. Already, Amazon’s shipping and fulfillment costs, up 37% year-over-year in Q4 to $1.8 billion, are growing faster than its revenue, which increased 22% to $35.7 billion in the same period. So far it has focused on making moves to make those operations more efficient, rather than scaling back on its fulfillment and delivery offerings to its Prime members.
Yet another is whether Amazon Prime members will stop caring about price. Some prices on the site are not the deals they once were. It’s unclear whether Amazon’s push to replace discounts with conveniences like same-day delivery will ultimately work for customers, who have been educated by Amazon in the first place to find discounts.
- Business Insider Amazon Prime has totally taken over upper income households
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