The Prime Effect: How Amazon Is Helping Retail Membership
Amazon’s growing strength, driven by its popular retail membership program, is helping to encourage consumers to subscribe to similar services, a recent survey finds.
You know how they say that a rising tide lifts all boats? Well, when it comes to membership models in the retail sector, perhaps the saying should be changed to “a rising Prime lifts most boats.”
Yes, Amazon Prime is giving many established retail brands a big boost as they experiment with the membership strategies that Amazon has been wildly successful with. According to data that the analysis firm AlixPartners shared with Retail Dive, members of Prime are more willing to test the waters with other membership programs. Amazon Prime customers are three times more likely than other consumers to subscribe to other services, and more than half of Prime members use another service on top of Amazon’s offering.
The secret sauce appears to be brand familiarity. According to the AlixPartners data, 88.7 percent of consumers say the next subscription offering they plan to join is from an established brand as opposed to an internet startup (11.3 percent). (Hence “most boats” rather than “all boats.”)
On top of all this, consumers don’t appear to be terribly concerned about the rising cost of these services, which are generally perceived to offer good value. When Amazon increased the price of Prime last year, 53 percent said it didn’t affect their use of the service, and 24 percent said they weren’t even aware of the change.
“There seems to be room for retailers to increase their subscription revenue; customers do not appear to mind paying more for subscription services and memberships,” AlixPartners’ New York director, Roshan Varma, wrote in a blog post.
The report comes at a time when both loyalty and membership programs are expanding in the retail space. Varma noted that the activewear business Lululemon, which has been testing a membership program in recent months, is seeing initial success and is about to expand it nationally. Meanwhile, the growth of Restoration Hardware’s program has buoyed the company’s stock price. And recently, Target announced that it is expanding its Target Circle program, launched last year in Dallas, to multiple cities.
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