Through a special arrangement, presented here for discussion is an excerpt of a current article from the Compete Blog. Compete Inc. is a web analytics company that focuses on understanding how consumers use the internet.
The rate of adoption of Amazon Prime, coupled with the growing reach of Amazon.com, has caused rivals to scramble to offer alternative programs and initiatives to stay competitive. Competitors fear that Prime dramatically lowers members' shopping activity on non-Amazon websites.
For $79 a year, Prime members receive unlimited two-day free shipping on eligible Amazon purchases (with no minimum order size), as well as access to Amazon's video-on-demand service, Amazon Instant.
What can we learn from the shopping behavior of Prime members, both on and off of Amazon.com, and how do their online shopping patterns differ from that of non-Prime members?
Compared to other shoppers on Amazon.com, Prime members return to the site three times as often and spend nearly two hours on the site each month, albeit some of this time is spent watching videos. In addition, Prime members' purchase propensity (or likelihood to purchase on Amazon in a month) is 78 percent, compared to just 18 percent among non-Prime visitors to the site.
One might expect that the ease by which Prime members quality for free two-day shipping would dissuade them from building "baskets" on Amazon, in favor of making purpose-driven, one-off purchases. While the total value of Prime members' Amazon orders are indeed 17 percent lower, Prime members actually purchase 11 percent more items per order than non-Prime shoppers. They are also still willing to pay for shipping, and do so on 39 percent of their Amazon orders, as a result of purchasing items that do not qualify for free shipping (sold by other sellers), or their opting for expedited shipping.
Despite the $79 fee for shipping perks, Prime members do not show a significant difference in their propensity to shop on rival websites. For example, 19 percent of people online in January visited Target.com, compared to the 20 percent of Prime members who visited the site.
In fact, when actually shopping, Prime members' consideration of rival retailers considerably exceeds that of non-Prime members. Thirty-one percent of Prime members shopped on both Amazon.com and Walmart.com in January, compared to 24 percent of non-Prime members on Amazon.
Amazon Prime generates an enviable stream of subscription revenue and sales for Amazon. It also enables Amazon to trumpet higher usage stats for its Amazon Instant service that comes with the service. But it doesn't appear to be doing is building a wall around Prime members. For rival retailers, Prime members are up for grabs and are in fact coursing through their virtual aisles in an attempt to find the best deal.