...And Part Time Marathoner
A few years ago I proclaimed to the world (OK, that might be a little grandiose)—I proclaimed to the handful of people who actually read this blog (OK, that’s more accurate)—that I had an unhealthy relationship with Chipotle.
You know Chipotle. It’s the fast casual Mexican grill that has had what I’ll conservatively label a “challenging” last 18 months.
Well, I still have an unhealthy relationship with Chipotle (you can keep your E. coli and norovirus comments to yourself), but now I am proud to say that I have added another outlet for my undying consumer love…Amazon.
While you may be able to say that you have never visited a Chipotle, I am virtually certain that you can’t make that same statement about Amazon. That’s because 266 million people have completed at least one transaction on Amazon.
However, placing one order on Amazon hardly makes one a compulsive Amazon shopper. But that’s how it starts—with one transaction. It starts as one. Then another. Then another. Pretty soon the boxes with the little smiley face arrow (you know the one…look at the photo to the right) start showing up almost daily. And if you are like me, they start showing up so frequently that you forget what you actually ordered and opening the boxes is actually like receiving a gift because you have no earthly idea what is inside. And if you have one adult beverage too many and decide to log on to Amazon there is no telling what you might find inside one of those boxes.
Take it from me…the proud owner of a pair of metal sporks that I thought would be great for all the leftovers I would certainly be taking to the office for lunch because I meal prepped so much (I also bought neat little travel containers for these aforementioned prepared meals).
On a side note, I can count, on one hand, how many times I actually meal prepped and brought those meals to work in 2016. But I am going to in 2017, I promise.
OK, back to my continued love affair with Amazon…
Let’s assume that you have made a few purchases on Amazon. And let’s assume that you are familiar with Amazon Prime. Yup…Prime. The holy grail of consumerism and what I think is the death knell for brick and mortar retailers.
While Prime is laden with perks, the real game-changer is free two-day shipping on over 20 million items available on Amazon.com.
There is quite possibly nothing that delivers the drug of rampant consumerism into our veins quite like Amazon Prime. Place and order at 11:50 PM on a Monday and get it on Wednesday. Why would I ever go shop at a physical store ever again? (and in the interest of full disclosure, I can’t remember a purchase I made at a store in the last two years, exclusive of groceries that I can’t purchase on Amazon pantry).
The one little “catch”—if you can call it that—is that Prime is a subscription-based service with a price tag of $99 annually.
At first I was skeptical. Pay 99 bucks a year to shop? But then I did the math. The expense of 99 dollars for free two-day shipping on damn near everything would save me more than that amount in gas not having to drive to physical stores in just a few short months. So I signed up, and that was—as they say—all she wrote.
And I am not alone. Reports—if they are accurate—indicate that Prime members now make up more than half of the online retailer’s repeat customer base. Numbers show around 63 million Prime members among Amazon’s shoppers—an increase of 19 million from June 2015.
And Prime is good for business. 44% of US households have Prime and 57% of Amazon’s revenue is generated from Prime subscribers. That’s because Prime subscribers spend nearly $2,500 annually which has helped Amazon to post several consecutive quarters of profitability, something that was a long time coming.
And that last paragraph gets me to the point of this entire post—I may be a huge fan of Amazon, but I am even more of a fan of their leader, Jeff Bezos.
Bezos, Amazon’s oft-embattled CEO took major criticism when he announced he would offer $99 subscription-based free shipping. Shareholders and analysts alike were quick to point out that Amazon would lose billions (yes, billions, with a “b”) having to pay for shipping.
They intimated that Amazon would never be able to recoup the shipping costs even with increased volume because online retailing margins are too slim. Bezos is crazy. Amazon will never make money. That was what all the “experts” said.
But ole’ Jeff is a long-term, big-picture thinker. He knew–unlike the day-trading investors and talking heads—that the real money was in the long con. Invest now and make bundles of cash later. And that’s exactly what happened.
But it didn’t happen overnight. Launched in 2005, Prime was a major sore spot for Bezos for far too long. But he knew it would work. He believed. And it paid off for him. Amazon Prime growth is about 12% per year, per Prime user—at least that is what the data (and Amazon doesn’t release complete subscriber metrics) indicates.
Non-Prime members spent less than $1,000 annually in 2015, according to several studies. In contrast, customers who joined Prime in January 2014 spent on average $2,147 in 2015. And customers who joined Prime in January 2012 spent on average $3,091 in 2015.
The longer a customer spends in the Amazon universe, the more they spend and that indicates that the investment that Bezos and Amazon made in the membership program is paying off and should continue to pay off for the foreseeable future.
As the Prime customer base matures through year-over-year membership, it would also appear that they are becoming more loyal to Amazon for their shopping needs. They spend more, they rate Amazon and their services higher and they—again, according to the studies I have read—intend to spend more with Amazon. So it would appear that Amazon Prime is not the abject failure that some thought it would be.
In fact, I believe that Prime is even more of a success than many realize. In my opinion, Prime is the Trojan horse of the Amazon empire. It is the carrot that is dangled out in front of consumers to get them into the Amazon ecosystem. It is the entry point to shopping, original content, movies, data storage and myriad other products and services that Amazon has to offer.
So Prime is the front porch of the Amazon universe. It is the first thing that many consumers come into contact with on the Amazon front. But, more than anecdotally, it is just the tip of the iceberg. It gets customers in the door and opens them up to the huge world of Amazon where—and they don’t even realize it—their data which they readily surrender—is more valuable than any shipping cost that Amazon has to pay. And in the end, it just leads us all to spend more and puts more money into Amazon—and Bezos’—coffers while at the same time driving us to depend on Amazon for everything.
And for that reason—not just because I get my products at a great price and receive it in two days for free—is why I am so in love with Amazon and Jeff Bezos.
In fact, I might go to Chipotle and shop on the Amazon app now. Or maybe I’ll just stay home and order takeout and shop with Alexa’s help. But the story of Alexa can wait for another day—and another post.
* Note – The data in the post above is not confirmed by Amazon as they do not release complete subscriber or financial data. The research referred to was not conducted by me—rather it was conducted by several far more reliable organizations than me—and I used the data without attempting to personally verify it.
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