Less than a decade ago, online shopping meant week long (or longer) waits for the items you ordered to be delivered to you. E-commerce shipping costs were high and often prevented shoppers from going through with their transactions. All of that changed with the introduction of a revolutionary service that put Amazon firmly in the driver’s seat in the e-commerce space. That service was Amazon Prime.
With Prime, Amazon shoppers were now assured of delivery within 2 days of placing their order, with no extra shipping costs attached. Over time Amazon has added a slew of additional benefits to its Prime program that has seen membership numbers soar and put pressure on other online retailers to play catch up.
Amazon Prime in a Nutshell
So what does Amazon Prime do, anyway? Amazon’s Prime subscription service allows members who pay an annual $99 subscription fee to receive free two-day shipping, exclusive access to content like movies, music and Kindle books, and unlimited photo storage. At least that’s how the program has traditionally been framed.
As of this month, Amazon has announced two additional monthly service plans for Prime membership. This adaptation to the wildly-successful program is a natural offshoot of Amazon’s desire to expand the Prime audience beyond those willing to shell out the $99 up-front. With these new consumer offerings, let’s take some time to review Amazon Prime.
Prime Members Convert, and Spend More
Any way you slice it, the Prime service has been an unequivocal success. A recent study from Consumer Intelligence Research Partners (CIRP) has Prime membership at 54 million US households. With the US Bureau of the Census reporting 124.6 million households in the US in 2015, that equates to roughly 43% of them being Prime households. Further, Prime shoppers now account for 47% of Amazon’s total audience. That’s an attractive audience segment to reach and it’s an audience which converts well and is loyal to Amazon. A 2015 study from Millward Brown Digital found that Amazon Prime members convert 74% of the time compared to 13% for non-Prime members. When Prime members shop with other online retailers, they convert on average 6% of the time. In comparison, the average conversion rate for Top 500 merchants is 3.32% (Internet Retailer). Prime customers are not only loyal to the program and to Amazon, they also spend more. According to the CIRP study, the average subscriber spends $1,100 per year on Amazon.com, versus $600 annually for nonmembers.
However impressive, it’s interesting to note that membership growth has slowed compared to earlier periods, and average annual spending volume has decreased as well (from $1,500 a year ago to $1,100 in early 2016). Analysts were predicting this slowdown in part, as Prime membership moves beyond its core base of consumers and reaches a wider demographic. With the announcement of monthly subscriptions added to the Prime membership portfolio, it’s easy to correlate the new offerings with trying to appeal to a different set of consumers.
Prime Day: Bigger than Black Friday for Amazon
No discussion about Prime would be complete without a mention of Amazon’s Prime Day, which takes place on Amazon’s birthday, held on July 15th. Although there was mixed reviews of some of the deals on social media last year, Prime Day was hugely-successful from both Amazon and our sellers perspectives. According to the company, Amazon Prime Day broke sales records, even exceeding Black Friday 2014 sales, which had been the biggest Black Friday to date. Incredibly, 398 items were ordered per second. Similarly, sellers who were able to participate saw large sales volume. To a lesser extent, some sellers benefited purely by the halo effect of increased traffic to the web site. If it wasn’t obvious already, only Prime enabled SKUs were included in the event.
Consider Amazon Prime for Driving E-commerce Growth Now, and In The Future
There are three primary ways in which sellers can flag their products as being Prime eligible: sell inventory wholesale to Amazon via first-party Amazon relationship, sign-up for Fulfillment by Amazon (FBA), or sign-up for Seller Fulfilled Prime (SFP) via third-party Amazon relationship. These three opportunities are distinct business decisions, and each offers a variety of pros and cons for sellers to consider. Some of the factors to consider as part of this decision involve assessing warehouse operations and fulfillment solutions, financial analysis, as well as, merchandising and marketing strategies.
With Prime Day less than two months away, and the Prime program continuing to grow, there’s no time like the present to consider signing-up for ‘Fulfillment by Amazon’ or ‘Seller Fulfilled Prime’. If you’ve been hesitant in the past to sign up for such a service, now may be the best time to diligently consider the prohibiting factors in doing so previously. Sellers are encouraged to review the clear business case for choosing Fulfillment by Amazon or Seller Fulfilled Prime for at least a portion of their product catalog, in order to get the Prime bump and increase sales velocity.
How CommerceHub can Help Support Amazon Prime Setup and Management
CommerceHub DemandStream provides the ability to collect, store, manage, and syndicate product catalogs to major demand channels from one central location. DemandStream allows for Fulfillment by Amazon and Seller Fulfilled Prime order tracking, automated switching of fulfillment settings between Fulfillment by Amazon and Seller Fulfilled Prime products based upon inventory levels, and seamless integration with your existing third-party e-commerce solutions, such as inventory and order management software.
Want additional information on how you can sell more with Amazon Prime? Contact CommerceHub’s Performance Marketing team today!