Amazon has focused the last two years on courting lower-income households.

Jeff Bezos’ surprise unveiling of the Amazon Prime membership number — 100 million-plus paying members worldwide — was a long, long time coming. So the attention it received was expected, if not deserved.

But that figure only gives a surface-level view into the success and current challenges of Amazon’s loyalty program — chief among them, how to keep growing in the country where Prime is the most popular and the biggest money-maker: Right here in the U.S.

Various Wall Street analysts have pegged Amazon Prime’s penetration at between 40 percent and 60 percent of all U.S. households over the past year. Those figures would suggest plenty of room to grow.

But the shipping-and-entertainment membership service has skewed way more popular among higher-income households, meaning the onus has been on Amazon to make tweaks and changes to sell Prime’s value to those who don’t have as many disposable dollars to spare.

As of August 2016, 60 percent of U.S. households with income of at least $150,000 had Prime memberships, according to research from Cowen and Company. Compare that with around 40 percent of households that made between $40,000 and $50,000 a year, and just 30 percent of those who earned less than $25,000.

Amazon, of course, knew these disparities better than anyone, and started making moves that same year to close the gap.

One of the first signs of the courtship of lower-income shoppers appeared in March of 2016, when Amazon introduced a monthly payment option alternative for potential Prime members who couldn’t, or didn’t want to, shell out the $99 annual fee in one shot. The catch at the time? You needed to be a Sprint wireless subscriber to get access to the $10.99 per month Prime payment option.

Just a month later, though, Amazon opened up the $10.99 option to all shoppers; earlier this year, Amazon raised that monthly fee to $12.99, citing the additional value and perks it continues to add to the program.

In 2017, Amazon unveiled Amazon Cash, a way for shoppers who don’t have credit or debit cards to load money into their Amazon accounts by handing over cash at partnering retail stores. In the process, one roadblock to shopping on Amazon for those without bank accounts was lowered.

Two months later, Amazon introduced a 45 percent discount to the Amazon Prime monthly fee for those shoppers who receive certain forms of government assistance; the service cost them just $5.99 a month. And just this March, Amazon added Medicaid recipients to the group eligible for that discount.

All the while, Amazon has continued to add selection to the massive catalog of goods available for free two-day shipping under Prime, and expanded the geographic areas that qualify for even faster delivery times.

There are some signs that the moves have been working. By early last year, Amazon Prime membership growth was strongest in the U.S. for households making less than $50,000 a year, according to a study by Robert W. Baird & Co. And Bezos said in this week’s shareholder letter that the company added more paying Prime members in the U.S. in 2017 than in any year prior.

Still, Prime’s overall growth rate in the U.S. is likely slowing, making it likely that Amazon will continue to introduce new options to make the service a no-brainer for everyone, and not just the well-off.

Recode – All Go to Source
Author:

Jason Del Rey

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