Amazon.com, Inc. (NASDAQ:AMZN) announced its second annual Amazon Prime Day and it’s a mark of AMZN’s charmed existence that last year’s widely derided event was actually the company’s biggest sales day in history.
With what AMZN learned from last year’s Amazon Prime Day — and growth in the rolls of Prime membership — it wouldn’t be surprising if the e-commerce gains topped its own record.
That would be an impressive feat. Amazon said customers ordered 34.4 million items worldwide during last year’s Prime Day, topping a record previously held by the Amazon Black Friday sale. Merchants who sell through AMZN’s fulfillment center posted a 300% increase in unit sales.
But most importantly, AMZN said a record number of new customers tried Prime Membership, and that’s the whole point of Amazon Prime Day.
Amazon Prime is one of the company’s most important strategies for growth because customers who pay $99 a year for membership spend much more money on AMZN than non-members.
AMZN Prime Is Unstoppable
Indeed, the difference between what Amazon Prime subscribers and non-members pay is remarkable. One market researcher found that non-members spend an average of $625 a year on Amazon. But the Amazon Prime subscribers? They spend an average of $1,500 a year.
At the same time, Prime has ample room to grow. Estimates have it that fewer than half of Amazon users have the $99-a-year membership. And once they’re on board, they tend to stay. Studies show that Amazon Prime retention rates improve the longer a customer maintains membership. More than 90% of Prime subscribers sign up for a second year. The renewal rate for a third year is more than 95%.
The bottom line is that new members stick around. Amazon Prime Day is the bait to get them hooked in the first place. It’s a no-brainer from a strategic marketing perspective.
The second annual Amazon Prime Day doesn’t move the needle on AMZN stock right now. It’s not like it moved on the news. But that’s not the point.
It’s a gimmick to further Amazon’s imperial ambitions, and for that purpose, it appears to work.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
