Will Amazon Lose Almost Half of Its Prime Members? Don't Bet on It
Last month, CEO Jeff Bezos finally disclosed the service has 100 million subscribers, most of which are paying at least $99 per year for the company's free two-day shipping and bundle of services. While the company doesn't report revenue directly attributable to its Prime program, the company reported $9.7 billion in total subscription services revenue, the bulk of which is Prime subscriptions. As a comparison, if Amazon's subscription revenue was its own company it would be the 289th largest, narrowly edging out the Huntsman Corporation. However, Huntsman isn't growing its top line by 52% per year like Amazon's subscription revenue. During a call with investors in April, Amazon announced it's increasing the price of its Amazon Prime service. In a poll of 7,000 Prime members, nearly half (45%) responded by saying they are planning to leave the service due to price increase. But Amazon investors should not count on lower revenue from Prime subscriptions. Also, after a latent post-acquisition period, Amazon is now looking to more aggressively integrate Whole Foods into its Amazon Prime product with two-hour Whole Foods delivery in select cities and 10% discounts for members. While there will be some marginally attached subscribers who will choose to cancel the subscription, it's doubtful this figure will run as high at 45%. However, this will be offset from the higher prices and increased spending attributable to secondary revenue effects.