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May 14, 2009

How big is Amazon Prime?

One of the most frequently asked questions we get at ChannelAdvisor from both retailers and Wall St. analysts is: "How many buyers do you think are in Amazon Prime?"  Well as a card carying member of Prime, I can't imagine why anyone that buys at least one thing a month online wouldn't have it.  But it is a unique program that I've found many consumers don't really understand.  Given that I typically guess that about 2-5% of Amazon's 91b active buyers.  Thus I guesstimate that there are 1.6-4m buyers in the program.  Of course, you'd expect these to be the power-buyers and Prime super-charges that so they probably represent a larger share of Amazon's GMV (Gross Merchandise Value - The sum of Amazon's retail and seller business' sales).


Amazon doesn't disclose any data related to prime which tends to fuel the speculation out there as well.

Well Gene Munster, a Wall St. analyst with Piper Jaffray (PJC), has a great report out.  Here are some highlights:
  • Gene's team did an analysis and a survey and discovered:
  • By PJC's estimates there are 2m Prime members and they are growing at a 24% y/y rate
  • The survey of prime members reveals that new prime members' gmv goes from $400/yr to $900/yr in their first year of prime (WOW!)
  • Thus every 1m prime members adds 1.5% to Amazon's revenues by PJC's calculations
  • Prime members spend 130% more than the non-prime Amazon buyer 
  • 92% of Prime members surveyed plan to renew 
Gene included this chart that illustrates the incremental lift that Amazon receives with each chunk of adoption:
Amzn_prime_sales


Aside from confirming that Amazon Prime is a great promotion for Amazon because it increases wallet-share dramatically, Gene also has helped sellers understand the 'pull' you can expect by having your items in FBA.  There's two ways to look at it:
  • At 2m users out of 91m that's 2%
  • But if they spend 130% they are essentially the same 'size' as 5m buyers or 4%.  
It's important to note that FBA not only gives you Prime member benefits, but also SuperSaver and the 'fulfilled by Amazon' tag that increases buyer trust.

We'll be digging into some more case studies on FBA - what works, what doesn't and how you can leverage this Prime audience that is on Amazon spending 130% more than the average Amazon consumer.

 

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