In a recent Investor�s Business Daily article, author Max Cherney outlines how Amazon�s new Prime Now is poised to help the retailer�s Prime loyalty programme �destroy the advantage that Walmart, Target and others hope to gain by offering online orders, in-store pickup and stores as warehouses for online deliveries.� Long considered one of retail�s most effective loyalty programmes with a purported 54 million members, the addition of Prime Now in 26 US markets may put Amazon yet another step ahead of the competition in the multichannel retail wars.
Cherney references a recent Wells Fargo report by analyst Matt Nemer that describes Prime Now as �a move to dominate �Need it Now� shopping. Prime Now, available only to Amazon Prime members in those 26 markets, offers free two-hour shipping on over 30,000 products and one-hour shipping for a $7.99 delivery fee. Money quote from Cherney:
Amazon�s push may eliminate a key advantage of physical retailers � the last-mile convenience of being able to get something immediately. As that advantage disappears, so do other advantages touted by brick-and-mortar stores, such as the ability to pick up an online order quickly at your local store� In the research note, Nemer says that Prime Now, though not currently profitable, helps Amazon retain Prime member loyalty and will, with scale, become profitable.
Wells Fargo isn�t the only analyst bullish on Amazon�s Prime investment. In a recent analysis of buyer shopping patterns for Amazon, Consumer Intelligence Research Partners, LLC (CIRP) revealed that Amazon Prime now has 54 million US members, spending on average about $1,100 per year, compared to about $600 per year for non-members. The membership estimate suggests that Prime membership grew 35% in 2015.
In his own analysis of Amazon�s Prime advantage, Motley Fool analyst Daniel Kline says:
Joining Prime is basically a customer pledging loyalty to Amazon, which makes it very hard for any other retailer to get their attention. In some ways that takes the 54 million Prime users off the gameboard for Walmart and others trying to increase their digital sales. Barring some sort of massive loss-leader big-ticket item backed by heavy promotion it's hard to imagine a Prime member buying from any company other than Amazon.
That, my friends, is the definition of �sustainable competitive advantage.� Any retailer can do what Amazon did�all it takes is the will to invest in your best customers.
Read Max Cherney's article here.
- Rick Ferguson
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