22 charts that show the incredible growth of Amazon Prime
APAmazon CEO Jeff Bezos
Amazon Prime is the online retailer's paid membership program that gives people free two-day shipping, free access to a bunch of books, movies and music, as well as unlimited cloud photo storage space.
Prime is an important part of Amazon's business because it helps to create more loyal customers who tend to spend more on its site.
Amazon CEO Jeff Bezos likes to call Prime "an all-you-can-eat, physical-digital hybrid that members love."
These 22 charts will give you a better idea of what Prime is and how the business is doing:
Amazon Prime originally launched as an annual membership program. Until last month, it only offered a $99/year option. Now it comes in three different tiers: an annual, monthly, and a video-only service.
Prime's growth has ramped up over the past two years, as it added more benefits and content, while expanding to more markets. Amazon doesn't disclose the exact number of Prime members, but the estimate is roughly 80 million worldwide.
Prime's biggest market is the US. Evercore estimates there are at least 64 million Prime members in the US alone ...
... that's 40% of all US households, according to Cowen & Co.
Prime members are driving sales for Amazon. According to a recent Cowen & Co. survey, 53% of all Amazon purchases came from Prime members (an all-time high).
Free delivery seems to be the biggest draw for Prime. Nearly 80% of Prime members signed up because of its free two-day shipping service.
That's why Amazon is doubling down on shipping benefits by expanding same-day delivery. Prime members can get select items delivered within two hours for free, if you live in certain regions. It's now offered in 27 regions in the US, which accounts for more than 1,000 cities nationwide.
In fact, Amazon has doubled its same-day delivery service (called Prime Now) over the past two quarters.
But people who haven't signed up for Prime seem to care more about discount offers.
That's interesting because Prime membership is heavily concentrated in upper income households in the US. New data from Piper Jaffray shows that the penetration is highest, and growing fastest, among households with more than $112,000 a year in annual income — more than 70% of households in that demographic have a subscription, up from less than half two years ago.
Amazon Prime members also make the most money on average, compared to other online retail customers.
But that doesn't mean Prime members are old. Nearly half of the membership comes from the 18 to 34 age demographic, according to Evercore.
Prime members tend to spend more the longer they use the service, according to Evercore. It's why Amazon wants as many Prime members as possible.
Prime members are also loyal Amazon customers. Almost none of them shop at other sites in the same session.
The most popular product category for same-day delivery turns out to be media, according to Cowen & Co. That includes books, music, and video products.
It's one reason why Amazon is pumping money into its online video streaming service. Amazon Prime Video's catalog is now more than twice the size of Netflix's, according to Barclays Research. But it still lags behind in the number of TV titles and original series.
n fact, most people think Netflix and HBO have much better original content than Amazon.
Amazon's programming spending is still less than what Netflix and HBO spends on their shows. Amazon said in its most recent earnings call that it will invest "significantly" in its video content this year.
With more original content, Amazon Video's market share will likely improve. And it's already winning accolades: Amazon's original series have earned 120 nominations and won nearly 60 awards, including Golden Globe and Emmy awards.
All this is leading to huge growth in Prime orders, which is causing huge increases in Amazon's shipping costs.
To save on delivery cost, Amazon is looking into a number of different options, like building its own logistics shipping network. Another idea is to launch Prime Air, a delivery service by an unmanned drone, which would significantly drop the delivery cost per package.
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