“Joining Prime is basically a customer pledging loyalty to Amazon, which makes it very hard for any other retailer to get their attention. Once Amazon has its claws into you, it’s really hard to escape. You’re already familiar with it, have an established account, and know what you’re getting into. Instead of comparing online prices between Wal-Mart, Target, Best Buy, and Amazon, you’ll just go straight to Amazon. Once you’re a Prime member, you’re much more likely to shop from Amazon than from from any other online retailer. Prime serves as the gateway for their entire ecosystem. Not only is Prime a cash cow for Amazon, but it also functions as a protective moat for the company. Yes, Prime costs Amazon huge amounts of cash to operate, but it makes far more money in return, which is why they’re willing to invest so much into it. So, once customers get into the habit of streaming free videos, Amazon has a chance to sell them on renting or buying videos that aren’t available for free.” However, Amazon has discovered that Prime members who use the free video streaming service are 10 times as likely to rent or buy movies from Instant Video as non-Prime members. “Prime Instant Video doesn’t actually make the company money. When you consider that Amazon has around 54 million Prime members, that adds up to a huge amount of additional revenue.Īdditionally, Prime Video users are far more likely to rent digital movies from Amazon. The average member spends about $1,100 per year while the average non-member spends about $600 per year. Amazon Prime members spend a LOT more than non-members. This is one of the reasons Amazon is willing to funnel so much cash into promoting Prime.īut it goes beyond that. Without Prime membership revenue, Amazon’s retail operations result in a $1.1 billion loss.” Revenue from our membership estimates covers 143%. “Amazon’s total operating profit for its retail operation came out to $2.66 billion. Without the subscription revenue, Amazon would experience a serious hit in their overall profits. This is the same model that other membership based retail outlets, like Costco use. This staggering amount of revenue allows Amazon to offer so many benefits to those who sign up for the service. Simple math says that the revenue generated by Prime alone is in the area of $5.3 billion. As of this writing, Prime costs $99 per year. Prime Generates A Lot Of CashĬurrently Amazon has somewhere around 54 million Prime members in the United States. In this post we’re going to show you how Amazon pays for all that shipping and why they want to get people into the Prime program so badly. So how do they afford all that shipping? Why do they care so much about getting people into Prime? They aren’t accidentally flushing $1 billion down the toilet every quarter. They offer Prime video, premium music subscriptions, credit cards, and loads of other deals in order to get people to sign up for Prime.Īnd with nearly half of all Amazon customers being Prime members, they seem to be doing a pretty good job. That’s an insanely high amount.īut if you’ve ever ordered something from Amazon, you know that they do everything in their power to get you to sign up for Prime. It costs them a ton – usually around “” target=”_blank” rel=”noopener noreferrer”$1 billion per quarter. They have to pay people to box it and then the cost of it being delivered to your house. Or you could lay on your bed, make your order with a single click, and then sit back and wait for your package to arrive.Īnd with drone shipping on the horizon, it only keeps getting better.īut have you ever wondered how they afford all that free shipping? I mean, it may be free for you, but it’s certainly not free for them. Sure, you could go to the store, wander around for awhile trying to find something, ask a disgruntled worker, and then finally make the purchase. I mean, seriously, there are few things better than two-day, free shipping. Amazon Prime is the greatest thing to happen since man landed on the moon.
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