Amazon investors got a breath of fresh air Thursday when the e-commerce giant announced it made a profit for the first time after two consecutive quarters of steep losses. The company made $214 million in the fourth quarter and saw its revenue rise 15% to $29.3 billion, sending the company’s stock up 13% in after-hours trading.
So what can Amazon thank for its profitable quarter? It’s looking more and more like Amazon Prime.
Amazon’s membership program appears to be paying off in spades for the company. Prime members get free two-day shipping, access to unlimited music, TV shows and movies — some of it exclusive — and a host of free ebooks and a slew of special deals. And it turns out Prime subscribers, who increased in number 53% last year, buy more from Amazon, watch more on Amazon, and spend more time on Amazon.
“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping,” Amazon CEO Jeff Bezos told investors Thursday, referencing a March 2014 decision to increase Prime’s price to $99 a year from $79.
Amazon jealously guards precise data about Prime members’ purchasing habits, but outside research groups have done plenty of speculating. According to a paper released this week by Consumer Intelligence Research Partners, Amazon Prime members number around 40 million in the U.S. and spend about $1,500 per year, compared to about $625 per year for non-members. If that estimate is in the right ballpark, Prime members are a huge boon for the company.
“Amazon Prime members spend more than other customers, on average shopping 50% more frequently, and buying more expensive items each time,” said Josh Lowitz, a co-founder of CIRP who helped conduct the study.
It’s no wonder Amazon treats its Prime members so well. This quarter, the company announced several new benefits for them: A free two-hour delivery service called Prime Now in select areas, unlimited photo storage in Amazon’s cloud, and a new television show produced by Woody Allen exclusively for Prime members. Those bonuses could very well help Amazon sign up yet more Prime members, potentially keeping the company in the black for yet another quarter.
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