How Prime acts as a tie that binds consumers to Amazon
April 2, 2015 05:23 PM
63% of shoppers at Amazon.com who belong to the e-retailer’s $99-per-year Prime two-day shipping and loyalty program convert during their shopping sessions, a new study from Millward Brown Digital finds. The research firm says that’s nearly five times the conversion rate of non-Prime members. It’s also far higher than the typical 3-4% conversion rate of U.S. e-retail sites in general.
Further driving home the value of Prime to Amazon, Millward Brown also finds that “the percentage of Amazon traffic from Amazon Prime members has increased 300% in the last year.” According to the Internet Retailer 2014 Top 500 Guide, Amazon.com receives more than 480.5 million monthly visits and more than 95.4 million monthly unique visitors, and it has a 4% conversion rate.
Amazon, No. 1 in the Top 500, did not immediately respond to a request for comment about the Millward Brown report.
Adding to the threat represented by the Prime loyalty program, Amazon keeps adding perks. Amazon today says it has rolled out its Prime Now one-hour e-commerce delivery service to Atlanta. Amazon Prime Now offers delivery of goods in as little as one hour to members of Amazon Prime for a $7.99 fee. Consumers order through Amazon’s Prime Now mobile app, available for Apple, Android and Amazon mobile devices. Amazon last week launched Prime Now in 24 Dallas ZIP codes after previously bringing the service to Manhattan, Brooklyn, Baltimore and Miami. Amazon promises more such rollouts.
Prime members appear increasingly tied to Amazon, the Millward Brown report suggests. Its analysis finds that “less than 1% of Prime members are likely to consider other [popular] online retailers during the same session. Take Target.com for example: a non-Prime member is eight times more likely than a Prime member to cross-shop between Amazon and Target in the same session. For retailers not named Amazon, this means fewer chances to influence the growing Amazon Prime segment and heightened pressure to get the experience and value perception right.”
When analyzing the “cross shop rate” from Amazon to some of its major competitors, the report also finds that:
• 12% of non-Prime shoppers are likely to “cross-shop” between Amazon and Walmart.com compared with 0.9% of Prime members.
• For Target.com, the figure works out to 8% of non-Prime shoppers and 0.7% of Prime shoppers.
• For BestBuy.com, it’s 5% of non-Prime shoppers and 0.6% of Prime members.
• For HomeDepot.com, it’s 4% of non-Prime shoppers and 0.5% of Prime shoppers.
• For Lowes.com, it’s 3% of non-Prime shoppers and 0.3% of Prime shoppers.
• For ToysRUs.com, it’s 2% for non-Prime shoppers and 0.2% for Prime shoppers.
To arrive at its findings, Millward Brown Digital uses its “Compete Clickstream” panel of more than two million U.S. online consumers to measure and analyze consumer shopping behaviors. In this case, Millward Brown identified Amazon Prime members as those who interacted with Prime content, managed their account, and/or engaged in Prime features. This group was then used to look at cross-shopping activities, such as shopping on other retailer sites like Target.com.
An estimate earlier this year from investment firm Macquarie says half of U.S. households could be members of Amazon Prime by 2020. Macquarie estimates 20-25% of U.S. households, or 40 million, include a Prime member. Macquarie also says in the fourth quarter of 2014 that 10 million consumers signed up for Prime.