Amazon has confirmed that it has 20 million subscribers to its Prime service, Ben Schachter at Macquarie reports in a new note.
Amazon had been hammered by the press for never giving out specific data on its Prime membership.
Prime is the service that gives users free 2-day shipping all year long. It also gives users a streaming video subscription similar to Netflix. Various reports have shown that Prime members spend a lot more money at Amazon.
The Bottom Line — AMZN confirms that it now has over 20 million Prime members worldwide. Wehighlight a key data point that may have been overlooked just after Christmas. On December 26, Amazon posted a press release with many positive data points and fun facts about Amazon Prime’s holiday season. The most interesting data point is that for the first time ever, AMZN stated, “Amazon Prime membership continues to grow, and we now have tens of millions of members worldwide“. We confirmed with the company that this represents 20mm+ Prime member worldwide.
AMZN also clarified the definition of Prime membership by confirming that if a household has multiple people using Prime, it is still counted as one Prime membership because that household only paid one $US79 fee for the year.
While it is still extremely difficult to accurately model the direct impact of Prime growth, we are convinced that it is a meaningful positive, as the lifetime value of Prime members exceeds that of other users. Growing Prime users remains a key focus for AMZN.
The press release also stated that “More than one million customers around the world became new Prime members in the third week of December.” This comes on the back of the 3Q AMZN earnings release which, at the time, gave more detail on Amazon Prime growth than ever before by stating that in the last 90 days, it “signed up millions of new Prime members.”
Finally, we believe among the reasons to be optimistic about the Prime growth is the fact that we believe more shipping leverage is coming. The simple fact is that the direct shipping cost is, in part, a function of package weight multiplied by distance shipped. As AMZN is opening more fulfillment centres closer to end-customers, we expect increased shipping leverage. The shipping leverage will benefit from increased Prime users.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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