A report by investment bank Baird says that adoption is increasing the fastest among households with earnings below $50,000 a year, a sign that Amazon’s $99 a year loyalty program might have more room to grow.
At $99 a year, Amazon’s Prime membership isn’t exactly cheap, and that’s why it has spread first among people with higher-than-average incomes.
But it seems the program, which offers shipping privileges, streaming video and a growing list of perks, is getting a boost from lower-income households, those who make less than $50,000 a year, according to analysts with investment bank Baird.
“Adoption is increasing the fastest” among these households, the analysts write, adding that it could mean incremental gains for a membership program that Baird estimates in the fourth quarter reached nearly half of the 125 million households in the U.S. It’s also bad news for discount retailers, the analysts say.
Baird’s data are based on a quarterly survey of about 1,000 households, 48.5 percent of which had a Prime membership in the fourth quarter of 2016 (versus 39 percent the previous year.)
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But if it actually portends the behavior of the general population, it means Amazon is having some success at forestalling “peak Prime,” the point where there’s no more growth in membership because everyone who could possibly afford it already is a member.
It could reflect the success of strategies such as offering a month-to-month option for $10.99, or investing billions in producing original content for the streaming video service wrapped in the membership.
Shows like “Transparent,” “Mozart in the Jungle” and “The Man in the High Castle” have become hits with viewers and earned critical accolades.
As Amazon CEO Jeff Bezos wrote in his annual letter to shareholders last year, “These shows are great for customers, and they feed the Prime flywheel. Prime members who watch Prime Video are more likely to convert from a free trial to a paid membership, and more likely to renew their annual subscriptions.”
Bezos, in the letter, also made a big deal about making Prime, which turns members into more loyal and frequent shoppers, worth every penny.
“We want Prime to be of such good value, you’d be irresponsible not to be a member,” he wrote.