One of Wall Street's favorite parlor games is making educated guesses about the number of members in the Amazon Prime program. The latest analyst numbers reveal that the program has grown very large indeed, approaching 50 percent of all US households - and according to reports, the company plans to drive ever more spending through the program. Some analysts, however, wonder if the retailer can live up to increasingly lofty expectations.
By Rick Ferguson
One of the Street's most dedicated Amazon watchers, Cowen analyst John Blackledge, revealed in an estimate reported through multiple outlets this week that Amazon Prime members in the US have risen to a record 49.5 million - up 20 percent from one year ago. Blackledge's number was the result of a survey of 2,500 consumers. The survey further found that Prime accounts for 57 percent of the retailer's total purchases, up from 49 percent one year ago. Other key stats:
- 83% of Prime members purchased items in October, compared to 49% of non-Prime shoppers.
- Prime members shopped on 3.8 verticals, on average, compared to 3.7 for non-members.
- Prime members spend more on average, about $1,100 per year compared to the $600 per year for non-members.
- Amazon retains about 95% of Prime members after one year.
Because Amazon doesn't reveal the number of Prime members, analysts can only make educated guesses as to the program's real numbers - leading some analysts to speculate that the program is even larger. In July, a Consumer Intelligence Research Partners (CIRP) study estimated that Prime had reached 63 million US members. Whatever the actual number, this dominant growth represents both incredible opportunity for Amazon and high expectations for analysts. Money quote from Reuters:
"Some fund managers and analysts say that Amazon.com's lofty upward trend is leaving the stock primed for a significant tumble should it not exceed high expectations for growth in its Prime subscription service, which jumped 50% last year. 'This stock is priced for perfection, and if they deliver merely perfection it will go down,' in the short-term, said Michael Pachter, an analyst at Wedbush Securities in Los Angeles."
Whether or not the future leads to Amazon drones drop-shipping boxes filled with 72-packs of toilet paper to every home in the US, the program that Amazon refuses to call a loyalty program has actually become the most successful loyalty program in retail history. So dominant has Prime become that several US retailers, such as home furnishings retailer Restoration Hardware, have placed all of their marketing muscle behind their own fee-based membership programs in the hope of building a retaining wall to protect against the Amazon tsunami. It's Amazon's world - we're just living in it.
Rick Ferguson is CEO and Editor-in-Chief of the Wise Marketer Group.