Spending by Amazon Prime members accounts for nearly 60% of Amazon's gross merchandise value, even though they make up less than 20% of the e-retailer’s customer base, according to a note from Deutsche Bank, Business Insider reports.
Deutsche Bank also found that Amazon customers double their spending on the site once they become Prime members, according to its research on 20 Prime customers who made more than 5,000 orders over a decade.
Piper Jaffray this month estimated that Prime subscribers will number between 60 million and 70 million by the end of 2016, and Bernstein said this month that there are already 58 million to 69 million members globally, up from estimates of about 54 million at the end of last year.
Amazon has been working hard to improve its Prime benefits to members, increasing the number of items that qualify for free two-day shipping, adding HBO exclusive shows and original programming to its video service, and more. Amazon Prime members pay $99 for free two-day shipping on many items, plus access to its video streaming service and other perks.
Jeff Bezos in his meeting with shareholders last month said that Amazon plans to build up its Prime membership program until people feel “irresponsible” if they are not members, although he didn’t specify how the company would do so.
There are ample reasons for Bezos to focus on Prime, with the majority of its members young, wealthy, sticky and spending more than non-members. Prime membership is growing fastest among wealthier households, according to Deutsche Bank, and more than 70% of households with annual incomes topping $112,000 have a Prime membership. 75% of Prime members convert when on the website compared to 13% of non-Prime members, according to a mid-2015 study from Millward Brown Digital.
The Prime shipping program and the complementary Fulfilled by Amazon third-party seller delivery service are the engines driving customer adoption, Piper Jaffray senior research analyst Gene Munster said earlier this month at an Amazon-themed workshop ahead of this year’s Internet Retailer Conference + Exposition.
“Prime Now [free two-hour delivery] is currently available in 37 cities, and Same-Day Delivery is now is 28 cities,” he said. “Amazon is trying to take away the advantage of brick-and-mortar, which is instant gratification.”
Prime’s success is prompting Amazon to bolster its delivery capabilities, he also said, noting that the company now operates 123 fulfillment centers nationwide, adding new facilities at a rate of about 15 per year. Amazon also operates 23 sort centers (waystations between fulfillment sites) across the U.S.