1 Feb

Amazon Has Rivals Worried—Again

WRITTEN BY Ruchi Gupta

Prime credit card to earn holders rewards

Amazon.com (AMZN) has partnered with J.P. Morgan (JPM) and Visa (V) to introduce a new credit card for its Prime customers. Holders of the Prime credit card will earn rewards for purchases made in and outside Amazon’s site.

Shopping on Amazon will earn Prime cardholders 5% cash back and spending on gas stations, drugstores and restaurants will earn them 2% cash back. Other purchases will earn the holders 1% cash back. The rewards are in the form of points that are credited to the account of the cardholder and can be redeemed for shopping on Amazon.

Amazon Has Rivals Worried—Again

The credit card move appears to be Amazon’s new weapon to counter rivals that have recently begun to match its loyalty and delivery services to attract online shoppers to their platforms. Prime accounts costs $100 per year and members benefit from free two-day shipping on a range of items purchased on Amazon. Because of the free delivery package, Prime members typically spend more than double what an average nonmember spends on Amazon shopping, according to Consumer Intelligence Research Partners.

A growing number of households are shopping online, with a survey by UPS (United Parcel Service) and ComScore showing 51% of consumers shopped online, as compared to 48% in 2015.

Prime credit card adds a competitive twist

Rattled by the shift of retail spending to online, legacy retailers such as Wal-Mart (WMT), Target (TGT), and Sears (SHLD) have attempted to match Amazon’s moves. But Amazon’s latest Prime move suggests the company is determined to keep raising the bar to defend its turf.

Not only do Prime members benefit from free delivery, they also enjoy a portfolio of services such as free online photo backups and online streaming video, including original shows on Amazon Video.

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