Amazon Prime Membership Lower Than Estimated
Unexectedly slow growth of Amazon.com Inc.’s (NASDAQ:AMZN) Prime service is adding to worries about the Internet retailer’s revenue potential, said a Bloomberg report on Tuesday. The Prime service, an essential part of the company’s efforts to maintain customer loyalty and boost profit, has brought in fewer than half the number of subscribers estimated by analysts, the report said, citing three people familiar with the matter.
The people, who wished to remain anonymous because the information is private, said Prime had three million to five million members as of October, while analysts have estimated the current number to be at least 10 million, according to the report. Amazon is trying to achieve seven million to 10 million in the next 12-18 months, the people said.
The Prime program, launched by Amazon in 2005, provides two-day shipping for $79 a year. Although the service raises Amazon’s shipping costs, it is a way to hook customers and encourage them to shop more, according to ChannelAdvisor Corp.
According to the North Carolina-based firm’s President David Spitz, a Prime subscriber could spend more than six times what they would normally spend after using the service for a couple of years.
The unenthusiastic response to Prime increases concerns about Amazon’s revenue growth. Last quarter, the company’s sales of $17.4 billion fell far short of the $18.3 billion predicted by analysts. Mary Osako, a spokeswoman at Seattle-based Amazon, declined to comment on the number of Prime members.