How Do People Value Amazon Prime in 2017?
By Mike Brown
Founded in 1994 as an online bookstore, Amazon has not only completely changed the way in which we shop, it has flipped the global economy on its head.
Amazon's arsenal of products first grew from just books when it began to offer CDs and DVDs. Since then, let's just say Amazon has made it almost pointless to shop anywhere else in 2017.
Engagement ring for your loved one? Check. New Refrigerator and some produce to fill it up? Check and check. What about some new tires for your '76 Mustang project? Don't worry, Amazon has you covered.
At the time of the writing of this article, Amazon was trading at $989.32 per share. Amazon is the fourth most valuable public company in the entire world, trailing behemoths like Apple and Alphabet (Google). It is the largest Internet company by revenue in the world and the eighth largest employer in the U.S. In 2015, Amazon leaped Walmart as the most valuable U.S. retailer by market capitalization.
More recently, Amazon's CEO and Founder Jeff Bezos made the headline grabbing acquisition of Whole Foods Market for a cool $13.4 billion. One would not be unreasonable in expecting Amazon to soon dominate the brick-and-mortar industry, just as it has done with the Internet.
In summation, Amazon has built a product that perfectly encapsulates the needs of the 21st-century consumer. We want everything to be one-click away and under one umbrella, and we want it at our doorstep in 48 hours.
Amazon has mastered the art of taking advantage of this modern-day consumer mentality of "more and right now." Bezos' baby has grown exponentially, forced smaller businesses to close their doors, and has kept people coming back time after time.
But, at what point would the one-stop shoppers not come back to Amazon? How valuable is Amazon to the American consumer? LendEDU strove to answer these questions in our most recent poll.
More Than A Quarter of Amazon Prime Members Question the Service's Worth
Amazon Prime is the company's flagship paid subscription service that gives users access to free two-day delivery, streaming video and music, and other benefits for a yearly fee of $99. To uncover some insights pertaining to Amazon Prime, LendEDU polled 1,000 Prime members on 17 questions related to the service.
To start things off the bat, we posed the following question to each respondent: "Currently, an Amazon Prime yearly membership costs $99, do you think it is worth it?"
While the clear majority of respondents, 71.80 percent, believe their $99 yearly fees for Amazon Prime is worth it, there was still a noticeable cohort of consumers that were left wanting more. 14.90 percent of poll participants flat-out said their Prime membership was not worth it, while 13.30 percent were undecided. Any service is going to have its naysayers and detractors, but to see that Amazon Prime, a product that seemingly has no vulnerabilities, had 28.20 percent of users questioning its worth was quite surprising.
After discovering what our respondents thought about the value of the current Amazon Prime membership fee, we posed some hypothetical Prime membership fees to see how deep consumers would reach into their pockets to hold onto Prime.
As one can see from the above chart, Amazon Prime is walking quite the tight rope with most of its users. When we set the hypothetical yearly fee at $100, just one dollar above the actual fee, 22.10 percent of respondents said they would not renew their Prime memberships. When the theoretical Prime fee was then bumped up to $150, the majority of respondents, 67.30 percent, stated that they would cut their Amazon Prime memberships.
The vast majority of Prime members, 85 percent, still would not renew their memberships if the yearly fee was raised to $200. When the hypothetical fee was again raised, this time to $300, 89.80 percent of the 1,000 respondents stated they would cancel their Amazon Prime memberships. Finally, 91.90 percent of poll participants would not retain their Prime memberships if the annual fee was $300.
What can be taken from this hypothetical series of questions?
First, Amazon should not consider a raise in the annual fee anytime soon. Even a moderate fee increase to $150 would cause the online retail giant to lose 67.30 percent of their consumers. Heck, 22.10 percent of Prime users said they would discontinue their membership even if the fee was bumped by one dollar to $100. So, despite Amazon Prime's extraordinary convenience and versatility, most Prime users are at their budget ceiling and will literally leave at the drop of a dime.
All of this being said, it is evident that there is still a small cohort of Prime members that are seemingly willing to pay any fee that is presented to them. Amazon Prime could raise its annual fee to astronomical levels, but it would be left with a small number of wealthy users. It is doubtful that strategy would bring in the same profits for Amazon Prime.
Nearly Three-Quarters of Prime Members Will Renew Membership Next Year
We asked our 1,000 Amazon Prime-using respondents the following question to reveal their intentions for next year: "Do you plan on renewing your Amazon Prime subscription next year?"
Even though the comfortable majority of Prime members, 73.80 percent, stated their intentions to renew Amazon's flagship service next year, the results from this question were not the best-case scenario for Amazon. 10.30 percent said they will not be renewing their Prime membership for another year, while 15.90 percent were undecided.
A recent report found that 91 percent of all first-year Amazon Prime members renew their subscriptions for the subsequent year, and that 96 percent of all two-year Prime users retain their annual subscriptions for a third year. Depending on where the "undecided" vote lands, Amazon could find itself dealing with one of its lowest annual retention rates, according to LendEDU's poll.
How Does Prime Stack Up Against Other Popular 21st-Century Services?
When you think of services that mean the most to the 2017 consumer, a few come to mind. There are ride-sharing services like Uber and Lyft, peer-to-peer payment services like Venmo, food-ordering services like GrubHub, and streaming services like Netflix and Hulu.
In terms of popularity, Amazon Prime can go toe-to-toe with any one of the aforementioned companies, but what about preferability?
Our 1,000 poll participants were asked to answer the following two questions: "If you had to pick one, would you choose an Amazon Prime membership or a ride sharing service (ex. Uber or Lyft)?" and "If you had to pick one, would you choose an Amazon Prime membership or Netflix?"
Judging from the results of these two questions, American consumers were much more willing to relinquish their ride-sharing service when compared to Netflix. 11.30 percent of respondents would rather give up their Amazon Prime membership instead of their ride-sharing service like Uber or Lyft. In comparison, 36 percent of consumers favored giving up their Prime membership as opposed to forfeiting their Netflix subscription.
Regardless, these responses proved how valuable Amazon Prime is to its users. Both questions resulted in a clear majority of respondents preferring to keep their Amazon Prime membership over other valuable services like Uber and Netflix.
The results from this poll did uncover an interesting trend that can be tied back to the streaming service offered by Amazon Prime. Respondents were way more reluctant to part with Netflix than they were with a ride-sharing service like Uber or Lyft. This was intriguing because Amazon Prime offers its own streaming service with original content, similar to Netflix. Amazon Prime does not yet offer any type of ride-sharing service that would be able to replace Uber or Lyft.
Essentially, respondents believed the services offered by Netflix could not be replaced by the streaming services of Amazon Prime, and many were willing to sacrifice their Prime membership due to this lack of quality from Amazon's streaming business.
Amazon's Impact on the Way We Shop
Amazon Prime's impact on the American economy is not exactly a secret. Amazon's ability to sell everything under the sun online and at a fraction of the cost has caused countless brick-and-mortar retail shops to shut their doors while also eliminating hundreds of thousands of jobs.
A report by the Institute for Local Self-Reliance found that Amazon has caused 135 million square feet of retail space to become vacant, or the equivalent of roughly 700 empty big-box stores and 22,000 closed Main Street businesses. The same report also estimated that Amazon's growth has resulted in a net loss of approximately 150,000 jobs after accounting for the number of jobs that the online giant has created.
We asked our respondents the following: "For an identical product, would you rather shop in-store at a physical location or purchase the item on Amazon Prime?"
For an identical product, 63.70 percent of Amazon Prime members would rather purchase the item on Amazon's website instead of going to an actual store, which was preferred by 36.30 percent of respondents. In 2017, this should not come as much of a surprise for anyone. People want things as soon as they see it, they want it in their hands not long after that, and they want to do all of that from the comfort of their couches.
But, how do consumers feel about their preferences? To find that out, we asked the following: "Amazon Prime has damaged the mom-and-pop economy. Does this statement make you feel remorseful about shopping on Amazon Prime?"
As one can see from the above graphic, a small number of Amazon Prime members, 21.70 percent, feel remorseful about giving their business to the publicly traded company, and not the small local business.
Meanwhile, 29.20 percent feel no sympathy for their shopping behaviors, and 49.10 percent of respondents, the simple majority, feel bad for a time until they reap the benefits of being Prime members.
What the results of this question display is that no one should be expecting a sudden reversal in consumer trends anytime soon. Guilt from Amazon Prime shopping is only temporary, but continuing to use the service because of its convenience and free two-day shipping seems to have become a permanent behavior.
It can be understood that Amazon Prime members, and 21st-century consumers in general, want to shop online as opposed to going to the brick-and-mortar store. But, are there any products that even Prime users feel must be bought in-person?
According to Amazon Prime members, large home appliances like a dishwasher or an oven are products that must be bought in-person. Other products that were commonly selected by our respondents included a mattress, food, shoes, and other clothing items not including shoes.
The Best, Most Used, and Most Desired Amazon Prime Features
The 1,000 Amazon Prime members that participated in this poll were asked the following: "What is your favorite feature of Amazon Prime?"
Not surprisingly, "free two-day shipping" received the lopsided majority of the vote. 84.60 percent pointed to Amazon Prime's free two-day shipping as the service's best feature, while 7.20 percent said "Amazon Video," and 4.90 percent declared their favoritism for Amazon Music. Another 3.30 percent said "other."
Amazon Prime's free two-day shipping is the most beloved feature, but is it the most used as well? According to our poll, the answer once again would be an overwhelming yes.
We listed out 18 of Amazon Prime's features and allowed respondents to select all of the features that they use. The results can be seen in the infographic below.
As the all-too crowded and colorful pie chart depicts, Amazon Prime's free two-day delivery feature is the most widely used amongst Prime members (25.85%). A few other popular features include Prime Video (12.41%), Prime Music (8.14%), Prime Now (8.14%), and Prime Rewards (6.35%).
Amazon Prime offers a litany of features for its paying members, but are there any potential add-ons that the service is missing? What are the most desired Amazon Prime services?
We asked our respondents the following: "Which of the following theoretical Amazon Prime services do you wish was included?"
According to our poll participants, the service they coveted the most from Amazon Prime was something mirroring cable or live television. 31.60 percent selected "cable" as the service they would most like to see added to Prime, while 27.70 percent desired a cell phone service similar to Sprint or Verizon. 16.70 percent wanted to see a food ordering and delivery platform, 12.70 percent called for a travel booking platform, and 8.40 percent wished to see ride sharing platform added to Prime's lineup. Finally, 2.90 percent of respondents coveted a room sharing service like AirBnB.
Transitioning from the results of the previous question, we actually asked our respondents to answer a question pertaining to live TV on Amazon Prime. Recently, the National Football League (NFL) and Amazon Prime reached an agreement in which the NFL paid Amazon $50 million to stream 10 Primetime Thursday Night Football games.
We asked our respondents this: "Would you ever watch an NFL game via Amazon Prime?"
Interestingly, the plurality of respondents, 38.10 percent, stated that they would actually prefer watching NFL games on Amazon Prime over traditional methods of viewing. 31.40 percent of Prime consumers said they would consider watching a football game through the streaming service if they had no other option. Meanwhile, the lowest percentage of poll participants, 30.50 percent, said they would never watch a professional football game on Amazon Prime.
Between the results from both the question regarding NFL football games and the one regarding adding live TV to Prime's list of services, it would seem Amazon would greatly benefit from adding some sort of live TV service to Prime.
Do Prime Members Know Who the CEO of Amazon Is?
As a final question, we decided to have some fun with our 1,000 poll participants and asked the following question: "Who is the CEO of Amazon?"
Impressively, the majority of respondents, 53.90 percent, correctly stated that Jeff Bezos was the current CEO of Amazon. 18.10 percent believed Tim Cook (Apple) was the CEO, while 10 percent incorrectly answered that Elon Musk (SpaceX) was Amazon's CEO. An additional 18 percent of respondents believed the author of this very article, Mike Brown, was Amazon's CEO (I wish!).
Methodology
All of the data that was used in this report came from a poll commissioned by LendEDU and conducted online by online polling company Pollfish. In total, 1,000 American consumers ages 18 and up were polled on each of the 17 questions. With the help of a screener question, we also ensured that every single one of the 1,000 respondents was a current member of Amazon Prime. This poll was conducted over a two-day span, starting on October 10th, 2017 and concluding on October 11th, 2017. Respondents were asked to answer each of the 17 questions honestly and to the best of their ability.
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Mike Brown
Mike is a Research Analyst at LendEDU. He has written about everything from personal finance and student loans to the most recent millennial trends. Mike's work has been featured on The Washington Post, Business Insider, The Wall Street Journal, Forbes, CNBC, and many more. Follow Mike on Twitter @mikebrownEDU for his latest opinions.
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Please be sure to consult your attorney, accountant, and/or other professionals with any specific questions. There is no one right answer to any business question that will cover all circumstances.
I think it is worth it if you purchase a lot online and take advantage of the movies you can watch. I won a year of it last year, but I won't renew because I already get free shipping from my Barnes and Noble membership and I usually order books.
ReplyDeleteWe have been members for years now. We got free membership for two years when we bought two Kindle Fire phones. We love the benefits and could not imagine being without it. It helps with getting products to review. Many sellers want us to have Prime to review their products. I think it helps boost our review ranking.
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