As 2015 wraps up, analysts at Macquarie Capital have some bullish projections for how Amazon will stack up once the full-year’s ecommerce data comes in.
Their conclusion: Amazon continues to completely take over the US retail space.
Here’s an excerpt from Macquarie’s note (emphasis ours):
In 2015, we expect AMZN will account for more than half of ecommerce growth:
- For every $1 of ecommerce growth, Amazon will take $0.51.
- For every $1 of total adjusted retail growth, Amazon will take $0.24.
- Think about the inverse of that: EVERY OTHER retailer is fighting for $0.49 and $0.76 of each dollar, respectively.
- Amazon’s US ecommerce share will grow 400 bps [basis points] (its fastest ever) this year to 26%, up from 22% last year and 16% in ’11
Macquarie chalks up Amazon’s market share growth to one thing: Its $99-a-year subscription service, Prime.
Prime subscribers get two-day free shipping on a bunch of items, as well as add-ons like free unlimited photo storage, free streaming for a large selection of music, movies, and TV, and access to the Kindle “Lending Library” for books.
Amazon tacks so much “free” stuff onto Prime — the $99 free ostensibly goes mainly towards the shipping and discounts — because Prime members spend more money, more often on the site. A recent survey had particularly striking numbers: RBC found that 73% of Prime customers shopped twice a month or more, compared to 22% of non-Prime members, and that 49% of Prime members they spent over $800 annually, compared to 16% of non-Prime users.
Another startup, Jet.com, tried to replicate the success of the subscription model earlier this year. Jet, which has raised north of $550 million, had a $50 subscription fee and promised prices that were as much as 15% lower than Amazon’s. It ended up dropping its membership fee in favour of lesser savings a few months after launch, however. Whether Jet will indeed be able to take on Amazon remains to be seen next year, but one consensus around its launch is that it’s brutally difficult to go up against the retail giant.
“We estimate Amazon Prime members now account for ~25% of total U.S. households (this is likely quite conservative),” analysts write. “We continue to believe that 50% of U.S. households will be Prime by 2020.”
That, too, Macquarie calls a “conservative” estimate, because right now Amazon accounts for just 3.5% of total adjusted US retail sales (excluding autos, food and beverage, and gas), giving it a lot of room to grow.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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