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A Look into Amazon’s Prime World

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Monthly plan a major Prime attraction

How many people have enrolled in the Prime membership program? The answer to this question has never come from Amazon (AMZN), nor has the company indicated when it will start being more transparent with its Prime numbers.

However, third-party companies have continued to speculate, and their reports make for an interesting read for Amazon investors. Consumer Intelligence Research Partners (or CIRP), for instance, has been studying Prime for years, and its recent report shows that Amazon’s introduction of a monthly Prime plan is helping it to draw more subscribers.

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Prime membership grows 8% in 1Q17

CIRP estimates that Amazon finished 1Q17 with 80 million Prime subscribers in the United States (SPY), up from 58.0 million a year earlier. Prime membership is also estimated to have risen 8.0% in 1Q17, compared to 7.0% in 1Q16.

The report also stated that 26.0% of US Prime subscribers are on the monthly plan that costs $11.0, suggesting that the budget plan is supporting membership recruitment. A standard Prime membership costs $99. Amazon reported retail subscription revenue of $1.9 billion in 1Q17. This amount included Prime membership fees.

Why Prime matters to Amazon

Prime is central to Amazon’s competition. It’s driving both retail and non-retail sales such as its advertising business. In the retail business, CIRP estimates that the average annual spending by a Prime member on Amazon.com is $1,300, more than double the average spending of a regular Amazon shopper at $700.

On top of this, Prime is enabling Amazon to build a loyal customer base to help it push back against competitors such as eBay (EBAY), Walmart (WMT), and Target (TGT).

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