The move seems aimed at extending Amazon’s reach well beyond the comfortable upper- and middle class that underpins its business — right as the e-commerce giant intensifies its battle against a reinvigorated Wal-Mart.
Amazon.com is offering a discounted membership in its Prime loyalty program to some recipients of government assistance.
The move seems aimed at extending Amazon’s reach well beyond the upper- and middle classes that underpin its business — right as the e-commerce giant intensifies its battle against a reinvigorated Wal-Mart.
Shoppers who have an electronic benefits transfer card are now eligible for a $5.99 monthly membership. That’s down from the typical $10.99 monthly charge for Prime membership, and slightly less, on a monthly basis, than the $99 annual fee.
Many government-assistance programs — including Temporary Assistance for Needy Families and the Nutrition Program for Women, Infants and Children — use an electronic benefits transfer card to distribute funds.
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Amazon said it plans to figure out how people who qualify for government-assistance programs that don’t use an electronic benefits transfer card can also qualify for the Prime discount.
Although Amazon won’t say how many people subscribe to its Prime program, analysts estimate there are tens of millions of members — about half of all U.S. households.
The membership includes two-day shipping on many items and other perks, ranging from photo storage to books. Prime members tend to spend more money buying goods from Amazon’s site than those who don’t belong. Their dues also bring the company a tidy sum: in the first quarter, Amazon collected some $1.9 billion from retail-subscription services, a category that includes, and is likely dominated, by the Prime membership.
But unlike Wal-Mart, which built the planet’s largest retail empire catering to middle America and now is making major inroads into e-commerce, the Prime roster skews toward the well-off.
Last year, analysts with Piper Jaffray concluded that 70 percent of high-income households belonged to Prime. A Morgan Stanley survey gauged that the average annual income of Prime members was about $87,000.
That has raised concerns about “peak Prime,” the moment when the growth-addicted company’s gains in Prime membership halt.
Amazon’s latest move falls in line with recent strategies employed by the company to keep the Prime machine expanding. Last year it introduced the monthly membership that people can cancel at any point. The annual membership had been the only previous option.
The company has also sunk billions into producing or acquiring movies and series for the streaming video service that comes with Prime, which Amazon CEO Jeff Bezos says lures people intro paying for a membership and keeps renewals coming.
Some of that strategy seems to be working. Analysts with investment bank Baird wrote in a report earlier this year that the adoption rate for Prime membership among households making less than $50,000 a year “is increasing the fastest,” a phenomenon that should concern discount retailers.