As per Consumer Intelligence Research Partners’ predictions (“CIRP”), e-commerce giant Amazon.com Inc. (AMZN) could convert 70% of the 10 million holiday Prime trial members to paying members.
On the basis of its analysis of earlier Prime member conversion and retention rates, CIRP forecasts that 7 million out of the 10 million new trial members will subscribe for a one-year Amazon Prime membership. In addition, it predicted that about 6 million of these subscribers will renew their membership after the first year.
Per CIRP estimation, about 84% of paid Prime members renew their membership after a year. So, it means that 5.9 million of the predicted 7 million paying members will reapply for a second year.
The company recently disclosed in its annual post-Christmas debriefing session that about 10 million new members tried Prime service for the first time, this holiday season, leading to yet another record holiday period for the e-commerce giant. Amazon also talked about its plan of expanding its one-hour delivery service, mobile-based shopping and the popularity of its Fire TV.
The Prime service charges customers a membership fee of $99 per annum and grants members the benefit of guaranteed two-day shipping. This could have been one of the reasons why the service attracted millions of first time members doing some last-minute shopping for their loved ones for Christmas. Amazon customers can try out the Prime service absolutely free as part of a 30-day trial before deciding on whether they wish to continue the subscription.
We believe that the Prime service will see growth in subscribers going forward, which will translate into increasing revenues. Moreover, the expansion of its Prime service to different cities will further expand the company’s revenue base.
However, the e-tailer is under a certain amount of pressure from investors who are increasingly unimpressed with its huge investments that continue to yield low returns because of its aggressive pricing strategies.
Amazon currently has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in this industry include Mercadolibre, Inc (MELI), Autobytel Inc. (ABTL) and zulily, Inc. (ZU). All these stocks carry a Zacks Rank #2 (Buy).
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