Why Prime is so important to Amazon

Amazon are forever giving stuff away for free or at very low cost to Amazon Prime members and the reason for this is Prime members spend more.

As well as free delivery included in the subscription, there’s video, music, Kindle books, photo storage, sharing with family members and early access to sales events. Prime Now and soon Amazon Fresh food deliveries will come to a place near you, and don’t forget if you’re not in a rush to receive your items you can get a no-rush credit towards a new book for your Kindle.

An RBC Capital Investment Bank survey of more than 4,000 US Amazon customers found that 37% were Amazon Prime subscribers, it’s estimated that there are 50 million US Amazon Prime subscribers and somewhere between 60 to 80 million globally.

Amazon Prime members spend more, 74% of those surveyed said that they spend more on Amazon since they took out their subscription and almost 50% spend over $800 per year – only 16% of non-Prime subscribers spend that amount. Prime is addictive too, whilst 41% of Prime members spend over $800 in their first year, by the fourth year it’s risen to 68% spending over $800 annually.

Prime is one of the best loyalty programs on the planet, hence Amazon willing to splash a reported £160 million for a new program with the ex-Top Gear hosts, which is all very interesting but what does it mean for you as an online retailer? The answer is Fulfilment by Amazon (FBA).

Your products will only be eligible for Prime delivery benefits if Amazon are shipping them. There will of course be some cross over from FBA products to seller fulfilled items, but often only if you have unique inventory that’s not available through FBA or if you’ve got a better price.

Prime is so obviously important to Amazon that they’re willing to give more and more away for free, and mostly it’s stuff that’s nothing to do with shopping. However the bottom line is all about sales and whilst FBA has some costs, if you’re selling on Amazon it makes sense to align your business plans with theirs and theirs is all about Prime.