Prime Drivers: How Amazon Prime Came to Dominate Retail

Amazon Prime has undoubtedly obtained significant penetration among U.S. consumers, with 42% of those between the ages of 18-74 being current members. The question is, which features of Prime are most valued, and additionally, which aspects are drawing consumers in, or driving them to renew their membership year after year?

As it currently stands, 50% of consumers between the ages of 18-44 have a Prime membership. By recognizing that the retail pipeline is being led by younger consumers, Prime membership should continue to grow in the very near future.

All About Free

In looking at the offerings from Amazon Prime, the primary driver for membership is clearly free, two-day shipping. 80% of Prime members aged 18-74 have utilized free, two-day shipping within the past 12 months, most significantly by women and those between the ages of 45-74.

Not only does free, two-day shipping represent the most used feature of Prime, but it is also the most important reason to be a Prime member, and the largest driver of membership renewal. When asked how important free, two-day shipping is as a reason to be a Prime member, 79% said it was “very important” to them.

Similarly, 71% of Prime members expressed that free, two-day shipping made them “very likely to renew” their membership with Amazon Prime.

As such, this model is now becoming table stakes for retailers, forcing their hand to react or be left behind. Most notably, Walmart introduced free, two-day shipping of online items with no membership fee as a means to compete with Amazon. A number of other retailers are expected to follow suit, if they have not already.

Amazon Has Unique Opportunity with Prime Now

Prime Now, which offers free, two-hour delivery in select cities, is especially popular among young men and consumers aged 18-34. Due in large part to Amazon, the concept of quick, efficient, and convenient shipping, whether that be shipping in two-hours, or two-days, has become an expectation among consumers, and something that makes Amazon Prime an attractive offering.

With Prime Now, Amazon offers an additional feature to draw consumers in, helping Prime gain further traction and differentiating the retailer from standard free, two-day shipping that competitors are offering.

Prime Eyeballs: Can Amazon Pass Netflix?

In addition to free, two-day shipping, consumers are also drawn to Amazon Prime in large part due to Prime Instant Video. Instant Video allows consumers to stream thousands of TV shows, movies, and award-winning Amazon Originals as part of their membership fee. Over half (52%) of Prime members have utilized Prime Instant Video in the past 12 months, with usage especially strong among men and those between the ages of 25-44.

Additionally, Prime Instant Video represents the second largest driver of Prime membership renewal, with 4 in 10 Prime Members stating that Instant Video made them “very likely to renew” their membership, again driven by 25-44 year olds.

Although it is not nearly on the same level as free, two-day shipping, Prime Instant Video is clearly a frequently used feature of Prime membership, and an important driver for consumers to renew membership.

In a world gearing more and more towards cord-cutting, streaming and on-demand entertainment, Instant Video provides Amazon with a stronghold in the industry. Overall, Prime Instant Video is second to Netflix in terms of market share among streaming video services, but Instant Video has shown significant growth from 2016 to 2017, while Netflix remains flat. Additionally, 48% of Prime Instant Video users also subscribe to at least one Amazon Add On, pay TV channels such as HBO, Showtime, etc., which is reflective of consumers’ interest in cutting the cord altogether, while also having access to select channels or content.

Prime Music has a small, but loyal, base

Prime Music, which allows consumers to stream from a selection of over 2 million songs, is used by a third of all Prime Members. Despite its growth, Prime Music remains a moderate driver for Prime membership as 29% of all Prime members state Prime Music makes them “very likely to renew” their membership. While Prime Music is clearly not on the same level as free, two-day shipping or Prime Instant Video, it is well liked among the key shopping group of 25-34 year olds.

The Future is Amazon

Amazon Prime is an established retail-focused membership program, driven primarily by free, two-day shipping and Amazon Instant Video. These two features are not only used by the majority of Prime members, but members also agree that they are an important factor in deciding to become a Prime member and in maintaining their membership year after year.

Quick, efficient, and convenient shipping has become table stakes for all retailers, largely led by the success of Amazon Prime. Because that feature is now cost of entry, Amazon Prime also succeeds thanks in large part to the inclusion of secondary features that differentiate it from the crowd.

Given the penetration of Prime among younger consumers, it is very likely Amazon Prime will continue to grow and innovate in the future, expanding and improving features included with membership, and ultimately expanding their membership base.