Amazon wants to increase the Prime program’s popularity
In the last part of this series, we discussed how eBay (EBAY) is planning to launch a program in Germany that’s similar to Amazon Prime. In contrast, Amazon (AMZN) has been working to increase the popularity of its Prime membership program.
According to a report from Recode citing people familiar with the matter, Amazon reached out to third-party sellers to qualify them to sell their products under the Prime program without needing to store the goods in Amazon’s warehouses.
Such a move by Amazon won’t only allow users access to increased product selection under the Prime program, but it will help third-party sellers increase their sales. It will help them sell their products directly to customers, without the need to store inventory in Amazon’s warehouses.
Operating profits benefit the Prime program
Amazon has clearly taken this initiative to make its Prime program more popular. A few months ago, Amazon mentioned that Prime membership grew by 53% YoY (year-over-year) worldwide. This is impressive, especially considering that Amazon raised the annual membership fee for the program from $79 to $99 last year.
Amazon also credits the increasing popularity of its Prime program for the growth of operating profits in 1Q15. The above chart shows that with the exception of 4Q14, the operating margins in 1Q15 were Amazon’s best results in North America over the last few quarters. Amazon benefited from the holiday season in 4Q14. This is why its revenue and operating margins were higher in that quarter.
For more on this topic, read Amazon manages to surprise investors with its operating profits. In this article, we also discuss how online sales by Amazon and other retailers, including Walmart (WMT) and Target (TGT), benefited immensely from the Thanksgiving holiday.
You can get exposure to Amazon by investing in the Consumer Discretionary Select Sector SPDR Fund (XLY). It has 6.1% exposure to Amazon.