Amazon 'Prime Day' aims to lure more premium subscribers
Amazon is offering a global shopping event that has “more deals than Black Friday” to commemorate its 20th birthday and entice consumers to sign up for its premium subscription service. Doing so is key for the e-retailer: Prime has been a huge success for Amazon, and it could be a key factor in securing consumers' loyalty as the e-commerce space becomes increasingly crowded with competitors.
On July 15, Amazon will host Prime Day, an international daylong sale, the e-commerce company announced Sunday. The sale is exclusively available for Prime members in the US, United Kingdom, Spain, Japan, Italy, Germany, France, and Austria. Shoppers in the US will be able to find deals at midnight, with new offers coming on as often as every 10 minutes.
Now in its 10th year, Prime, which costs $99 per year, has a range of perks, including free two-day shipping and unlimited streaming of TV shows, movies, and songs. Although Amazon has yet to disclose how many people participate in the service, CEO Jeff Bezos said in the company’s 2014 fourth quarter financial statement that Amazon has “tens of millions” of subscribers. Worldwide paid membership grew 53 percent in 2013, with US membership growing 50 percent that year. In January 2015, Re/Code reported that a partner at Amazon said the company had around 60 million Prime members worldwide. In May, Consumer Intelligence Research Partners (CIRP) estimated that Amazon Prime had 41 million US members.
But for Amazon, Prime doesn't just offer up millions of customers paying $99 per year for free shipping; it also offers up customers who spend more than their non-Prime counterparts. CIRP found that Prime members in the US spend on average about $1,100 per year, while non-members spend about $700 in that time frame, adding up to an extra $164 billion spent by Prime members per year.
The extra spending could attributed to the company’s "conversion rate" – how often retailer gets a website visitor to become a paying customer. In June, website traffic measurement firm Millward Brown Digital found that when Amazon Prime members go to the site, they "convert" (buy something) 74 percent of the time, Internet Retailer reported. In comparison, non-Prime members convert 13 percent of the time. And it turns out that Prime members are very loyal: when they go to other online retailers, such as Walmart or Target, they convert just 6 percent of the time.
In late April, Amazon reported its first quarter sales were $22.72 billion, 15 percent higher compared to 2014’s first quarter. The company estimates its second quarter sales will be between $20.6 billion and $22.8 billion, which means sales would grow grow between 7 percent and 18 percent compared to last year’s second quarter.
Amazon did not disclose how much of its sales comes from Prime members. But if CIRP’s estimates within the ballpark of Amazon’s actual numbers, then it is a no-brainer for the online retailer to continue to expand Prime. Besides the Prime Day sale, Amazon has extended its Prime Now service, where members in select US cities can order “essential” items on their mobile devices and have their orders delivered within two hours for $7.99. Last week, Amazon started to offer the service in certain parts of London, according to CNET.
