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Amazon’s Prime Wardrobe In Perspective

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Making the Prime program more attractive

In June, Amazon (AMZN) launched its Prime Wardrobe service, which allows customers to try on clothes before they buy them. As the name suggests, Prime Wardrobe will be open to Prime subscribers, the group of customers that pay Amazon $100 a year for a range of perks such as free two-day shipping and entertainment services.

With Prime Wardrobe, Amazon has made another step to increase the attractiveness of Prime subscriptions. According to CIRP (Consumer Intelligence Research Partners), Prime customers spend two times more on Amazon purchases than do regular customers.

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Potential boost to subscription business

If Amazon can get more customers to sign up for Prime, which is also available on a monthly plan, it could boost its retail and subscription revenue. Whereas Amazon doesn’t disclose Prime statistics, CIRP estimates that US (SPY) Prime membership stood at ~85 million at the end of 2Q17, up from 63 million a year earlier.

Potential leverage in fashion retail

Beyond potentially boosting Prime membership and retail and subscription revenue, Prime Wardrobe also presents an opportunity for Amazon to grow its share of clothing sales. Though Amazon is the leading online fashion retailer, the bulk of fashion sales still take place offline, at stores such as Macy’s (M), Nordstrom (JWN), and Gap (GPS). Prime Wardrobe is designed to make people comfortable to shop for clothes online, as it offers free delivery and returns.

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