It’s no secret that Amazon.com, Inc. (AMZN) is a major force to be reckoned with in retail. Walmart (WMT) and Target (TGT) have been desperately trying to insulate themselves from their web-focused rival for years.
Alas, a recent survey from Wall Street firm Cowen & Co. shows, once more, that resistance is futile.
Not only does Cowen peg the current number of Amazon Prime members at 41 million through November (up 1 million from October), it found that those Prime members are younger and wealthier than Walmart and Target customers. Oh, and AMZN prime members are buying more and more stuff through Amazon, too.
At this rate, Walmart and Target should probably just savor this holiday season, because each subsequent year will look bleaker and bleaker as Amazon continues its quest for world domination.
Amazon Prime Working to Perfection
It doesn’t take much data to realize why WMT and TGT should be shaking in their boots. Amazon Prime members boast an average household income of $69,300, about 25% higher than the same metric for Walmart. At an average age of 36.5, they’re younger than the average Walmart consumer (42 years old).
Consumers in the Amazon ecosystem are also buying from more categories than they were a year ago (4 vs. 3.6), showing Amazon is becoming the default retailer for a wider variety of products.
Amazon Prime, which costs $99/year, is sticky — it keeps members around and it keeps them active. That’s precisely what AMZN wants, since Prime customers tend to buy more than other shoppers.
With the amount of services and special treatment that come with an Amazon Prime subscription, it’s no wonder the service is “sticky” and growing. Walmart and Target truly cannot compete with the bevy of benefits AMZN offers through Prime, and if they ever tried to build a similar service it would take years and cost a fortune.
Even then, Amazon would have a depressingly long head start.
Amazon Prime includes a streaming video service in the vein of Netflix (NFLX) — Amazon Prime Video — as well as ad-free streaming radio through Amazon Prime Music, free two-day delivery, Prime Now one-hour delivery (in some markets), and in the future, on-demand drone delivery.
Don’t get me wrong, there will always be a place for Walmart and Target, the big-box physical retailers of yesteryear. Some people don’t like shopping online, and even more people probably aren’t willing to pony up $99/year, even if it comes with some exemplary benefits.
But consumers not willing to pay $99 for Amazon Prime will almost by definition be more cost-conscious, meaning Walmart and Target will forever be plagued with less well-off — and therefore less profitable — customers.
This is more music to the ears of AMZN investors, who have seen shares soar 116% in 2015 alone. If this trend continues — and there’s literally no reason to expect it will end anytime soon — more outsized gains should await long-term investors.
As of this writing, John Divine was long AMZN. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
