Walmart And Target Being Crowded Out Online By Amazon Prime

Amazon Prime: driving web shoppers away from traditional e-tailers.

As Amazon Prime debuts its one- and two-hour delivery program in cities across the U.S., new data suggests the e-commerce giant’s annual subscription service is starting to crowd out online competitors like Walmart and Target TGT +0.18%, despite the best efforts of these big-box retailers.

Market research consultancy Millward Brown Digital analyzed the buying patterns of more than 2 million online consumers, finding that Prime membership narrows the field of retailers a shopper is willing to consider.

The company’s analysis of Prime versus non-Prime members’ cross-shopping behaviors found that less than 1% of Prime members are likely to consider other mass-market retail sites — Walmart.com and Target.com, for example — during the same online session.

An Amazon shopper without a Prime membership is 8 times more likely than a Prime member to cross-shop between Amazon and Target.com in the same session.

Amazon famously isn’t big on revealing internal data, and hasn’t ever disclosed exactly how many Americans are now paying $99 a year to take advantage of its Prime service, which includes free two-day shipping, video and music streaming, and an ever-increasing list of other perks.

A recent survey by Consumer Intelligence Research Partners estimates this membership figure at around 40 million, up from approximately 10 million in March 2013.

Millward Brown Digital’s study shows the percentage of Amazon.com AMZN +0.62% traffic from Amazon Prime members increased 300% in the last year.

This increase means a growing number of shoppers visiting other retailers’ websites are also Prime members. During the most recent holiday season, for instance, 8% of Walmart.com shoppers also belonged to Amazon Prime. That’s up from 2% during the same period in 2013.

Critically — both for Amazon, and for other retailers struggling to compete — Prime members are bigger spenders than the average online shopper, buying about $1500 worth of goods and services at billionaire Jeff Bezos’ web emporium each year,according to CIRP’s data.

By way of comparison, the average non-Prime subscriber spends less than half that at Amazon: around $625 a year.

For Walmart.com, Target.com and other retail sites trying to play catch-up with Amazon, the “conversion rate” of Prime shoppers — that is, the percentage browsing online who actually buy something — may prove the most sobering statistic.

63% of Amazon Prime members carry out a paid transaction on the site in the same visit, says Millward Brown Digital — almost five times the conversion rate of non-Prime members, who buy an item during an Amazon.com browsing session 13% of the time.

That number dips considerably lower for consumers visiting traditional big-box stores’ websites. This study shows 2% of Target.com shoppers purchase something during their online session, closer to the U.S. e-commerce average conversion rate of about 3%. For Walmart.com, that figure is 5%.

Amazon Prime members are slightly more likely to spend money on both those sites: these subscribers “convert” at a rate of 6% on both Target.com and Walmart.com. Better, but a far cry from Amazon’s high double digits for this growing segment.

For its part, Target recently revealed a $1 billion investment in technology which will include an overhaul of its digital channel. Walmart, which saw its fourth-quarter web sales up 18% year-on-year, will pump $1.5 billion into its e-commerce business this year.

Whether either will be able to win back any of those deep-pocketed, loyal, and incentivized Prime shoppers from Amazon remains to be seen.