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The growing reach of Amazon Prime

February 26, 2015 01:43 PM
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Amazon.com Inc.’s Prime shipping-and-loyalty program will have attracted perhaps half of U.S. households by 2020, according to a new prediction from Macquarie Research, part of Australia-based global financial services firm Macquarie Group.

A research note released this week estimates that within five years, 40% to 52% of U.S. households will hold Prime memberships, which cost $99 annually and include free streamed content and music, electronic books and other sweeteners, including the future services of filmmaker and comedy writer Woody Allen. That compares to the 20% to 25% of U.S. households that Macquarie says now belong to Prime—a figure that translates into about 40 million members, according to Macquarie and other recent estimate from market research firm Consumer Intelligence Research Partners LLC.  

The Macquarie report says that about 10 million consumers tried Prime for the first time in the fourth quarter of 2014. “Many of those would be in trial accounts,” the report notes.

Amazon, No. 1 in the Internet Retailer 2014 Top 500 Guide, declines comment about the Macquarie report, but the e-retailer in any case typically discloses few figures about Prime. The e-retailer did state in its latest earnings report for the fourth quarter of 2014 that Prime memberships increased 53% last year, and 50% in the United States.

Nor does Amazon say how much it spends on Prime, but figures from its fourth quarter earnings report provide some idea. Spending on technology and content, including fees for licensing content for its Amazon Prime Instant Video service, increased 41.5% to $2.635 billion from $1.862 billion. And spending on fulfillment increased 17.3% to $3.424 billion from $2.918 billion in 2013.  However, part of the growth in fulfillment spending comes from Amazon managing fulfillment for more of the merchants that sell on Amazon.com through its Fulfillment by Amazon service. Marketing firm ChannelAdvisor Corp. says nearly 40% of its retailer clients that sell on Amazon use the Fulfillment by Amazon service.

 

 

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