There's new evidence that fewer people are signing up for Amazon Prime as the membership has gotten more expensive
- There's new evidence buried in Amazon's latest earnings report that fewer people are signing up for Prime. Amazon raised the price of a Prime membership earlier this year, to $12.99 a month or $119 a year.
- The way Amazon accounts for revenue from Prime subscription fees in its earnings has changed this year, which provides a look at how Prime membership has slowed down, according to analysts at Normura.
- Decelerating Prime growth is something to watch, as the membership is highly valuable to the company's revenue from retail sales. The gap between purchases made by Prime customers and non-Prime customers may be getting wider, according to a recent report by Consumer Intelligence Research Partners.
- Amazon CFO Brian Olsavsky said during an earnings call with analysts that the company was happy with Prime's progression.
Amazon's Prime machine might be slowing down.
Buried in Amazon's latest earnings report is evidence that fewer people are signing up for Prime.The way Amazon accounts for revenue from Prime subscription fees in its earnings has changed this year, which provides a look at how Prime membership has slowed down, according to analysts at Normura.
"The new straight-line approach to recognizing Prime Fees provides a look at Prime Membership growth, which by all accounts does appear to be decelerating," Nomura analysts said in a note to investors on Friday.
This comes after a price increase earlier this year, when Amazon bumped up the cost of a Prime subscription by $20, to $119 yearly. Amazon also raised the price of a monthly subscription to $12.99 a month in January.
During the company's third-quarter earnings call, in response to an analyst's question about the effect of the price increase on Prime memberships, Amazon CFO Brian Olsavsky told analysts that the company was satisfied with the numbers.
"We're very pleased with the renewal data and annual sign up data that we've seen," he said. "Since then, program remains very strong, both in membership and engagement, and a lot of our video content, music and shipping definitely, as well as other Prime benefits. We just continue to see that ramp up, not only in the US, but in other countries."
It isn't the first signal that Prime growth has stagnated. According to a recent report by Consumer Intelligence Research Partners, Prime's membership growth appears to be slowing in the United States.The firm estimates that there are a total of 97 million Prime subscribers in the US. Over the past 12 months, that number only grew 8%, which is the slowest rate recorded since CIRP started tracking Amazon Prime subscriptions in 2012.
"Prime membership growth has clearly flattened," Josh Lowitz, a cofounder at CIRP, said in a press release about the report. "Amazon Prime membership has now spread far beyond the early adopters who were presumably the most committed Amazon shoppers."
Decelerating Prime growth is something to watch, as the membership is highly valuable to the company's revenue from retail sales. Prime members have long spent more and shopped more often on Amazon.
But now the gap between Prime customers and non-Prime customers may be getting wider, according to CIRP.
While Prime members buy an average of $1,400 a year worth of stuff on the website, regular customers only spend $600. That's a wider gulf than was reported by CIRP last year, when Prime customers spent an average of $1,300 and other customers spent $700.