Amazon.com AMZN recently announced some changes in the Amazon Prime Policy. The e-Commerce giant reduced the number of people who could share a Prime member’s perks from four to one member of their household.
Amazon Prime service charges customers a membership fee of $99 per annum and offers guaranteed two-day shipping. Earlier, Prime members could add up to four persons to their Prime account by simply filling in details like names, relationships, birthdays and email addresses.
Prime members did not have to share their login or card details with the other members for making any purchase. Also, all payments and deliveries were independent for the members.
Changes to Amazon’s Prime Policy
Per the new Amazon Prime Policy, effective Jul 31, Prime members can only share their account with one other adult in the same household. Earlier, the policy specified that non-members added to Prime accounts should live in the same house, but there was no way to check it. Now, both the parties have to authorize each other’s credit and debit card details listed under the account to complete a transaction. This counter authorization should ensure that only family members are added.
Under the new rules, the non-member will get guaranteed two-day shipping, in addition to Prime shipping benefits, Prime Instant Video, Kindle Owners' Lending Library and Prime Early Access.
Bottom Line
The Prime service has been expanding considerably over the years, with new memberships exceeding more than the company’s expectations during peak periods in December. Recently, the Consumer Intelligence Research Partner (CIRP) offered the following numbers regarding Amazon Prime Membership (CIRP surveyed 500 U.S. customers who purchased goods on Amazon in the March quarter).
• The number of people subscribing to this service increased to 41 million (as of Mar 31, 2015).
• Since the end of Dec 2014, Amazon Prime added about 1 million subscribers.
• 42% of Amazon's U.S. customers are Prime members, who, on an average, spend about $1,100 a year, 57% more than about $700 spent by non-members.
This move could further help Amazon encourage more people to open their own accounts. With the need to disclose the credit card details, the company will be able to distinguish those who share the account only to cut costs. This would attract more users, in turn giving Amazon leverage against content providers and lower costs, thus improving the top line and margin.
We believe that the giant e-tailer’s ever-expanding content will continue to attract subscribers despite the recent policy change.
Currently, Amazon sports a Zacks Rank #1 (Strong Buy).
Investors can also consider other well-performing stocks in the same space such as Expedia Inc EXPE, PetMed Express, Inc. PETS and Groupon Inc. GRPN. While Expedia sports the same Zacks Rank as Amazon, PetMed and Groupon have a Zacks Rank #2 (Buy).
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