The Climb of The Prime: What Does Amazon Prime Mean for Retailers?

July 11, 2014

Marketplaces ChannelAdvisor By ChannelAdvisor

Amazon Prime

Amazon Prime (n): The elite Amazon service for the utmost savvy online shopper. Members are granted free, two-day shipping on all products, a multitude of films to stream whenever one desires, thousands of songs to be serenaded by and complimentary eBooks at hand.

So how will that $99 annual membership fee affect you retailers? Let us help explain. Here, we’ll analyze industry trends and drill down into consumers’ thought processes for throwing their dollars into cyberspace instead of brick-and-mortar stores.

E-Commerce Growth Spurt

Recent research from comScore shows that e-commerce purchases have grown 12% year over year, continuing to outpace offline retail growth, which only shot up a mere 1% year over year.

This past holiday season, Amazon.com shipped enough items with Prime to deliver at least one gift to every household in America. In fact, Prime was so popular that Amazon limited new membership signups during peak periods to ensure that current members’ service wasn’t affected by the flood of new memberships, reports an Amazon press release.

The Power of Free Shipping

Free shipping seems to be the secret ingredient to winning a consumer’s dollar. In the same comScore research, 49% of respondents selected free shipping as the “most important” factor in their online shopping process. Free shipping even beat out “no sales tax” and “in store pickup” for the MVP factor.

Among the shoppers comScore surveyed, free shipping was the go-to reason that “Primers” signed up for the service — taking the cake as the top reason at 63%. Unlimited movie and TV show streaming wasn’t even a close runner-up at 15%.

It appears that speedy and free shipping logistics is Prime’s philosophical magnet. A retailer that uses fulfilment by Amazon (FBA) is eligible for Prime’s free shipping option, but a retailer won’t receive the Prime label if they fulfill orders independently.

Showrooming

Showrooming — the act visiting a store to examine merchandise with intentions of purchasing online for a cheaper price — is on the rise. The comScore research shows that nearly a third of online consumers have showroomed. Price is the primary motivator in swaying shoppers to the internet to make transactions. Most consumers (73%) said that prices were better online.

Online retailers, it should be comforting knowing that brick-and-mortar stores are helping your sales. Half of consumers in the comScore study planned to buy online but wanted to see items in person before ordering. For those that have a physical store and a corresponding website for purchasing, it may be time to consider making those online images as vivid as possible.

Polling 500 consumers who bought items on Amazon last quarter, Consumer Intelligence Research Partners found that those with Prime subscriptions spent twice as much money as non-Prime shoppers. Even the smallest price variation makes a big splash in the e-commerce sea.

The Bottom Line

“Amazon Prime membership continues to grow, and we now have tens of millions of members worldwide. They benefit from all-you-can-eat free two-day shipping on millions of eligible items, and our members have a voracious appetite,” said Jeff Bezos, founder and CEO of Amazon.com.

Amazon is doing something right. Prime members (who account for approximately 50% of Amazon sales) showed significantly higher dollars per transaction and per buyer, according to comScore.

Amazon Prime and Non-Prime Members Average Spend

Even the $20 price increase to $99 per year didn’t seem to deter prospective users from considering the membership program.

E-commerce activity isn’t going anywhere anytime soon. Amazon is riding the wave, and the waves are only going to get more ferocious — especially with the complimentary Prime membership that comes with the purchase of Amazon’s new smartphone, Fire.

 

Blog post by Jordan Nowlin, social media and blog manager, ChannelAdvisor


Us-ebook-Amazon-FBA-coverWant to get your products in front of Prime consumers? Check out our eBook fulfilment by Amazon: A Deep Dive into Amazon’s Global Shipping Network.