Amazon Prime: the key to Amazon's dominance

Omnichannel/E-commerce

Relentless is the name that the founder of Amazon had planned to give to his company. At the time a Wall Street banker and intrigued by the growth of e-commerce, Jeff Bezos wanted to take advantage of it. He set up an online store with a very simple goal: to sell.

Clothes are often disappointing when you try them on and generate a lot of returns; high-tech products require extensive after-sales service and repairs. Books, on the other hand, are standard items, low cost, easy to store and cheap to ship. The brand was created with the ambition of becoming “the earth’s biggest bookstore”.

A few years later, the online bookseller is the world leader in e-commerce. Its ambition remains the same – to attract as many customers as possible with choice, low prices, fast, convenient and reliable delivery.

How has Amazon become the daily go-to for millions of people?
Why is Amazon Prime the most successful loyalty programme in the world?

Let’s see how Amazon has redefined the rules of e-commerce. (Spoiler: Jeff Bezos still owns the domain name relentless.com, which directs you to the Amazon website).

Turning customers into (very) loyal subscribers

In 2005, 10 years after its launch, Amazon revolutionised the e-commerce sector by launching Amazon Prime: a subscription-based loyalty programme that offers fast and free delivery.

Prime meets the expectations of online shoppers: ease of use, attractive price and fast delivery. After all, free delivery within one working day has long been Amazon’s competitive advantage – no other player is currently able to match this. In major cities, you can even order an item before noon and receive it the same day.

The subscription business model was first adopted by the music and beauty sectors, such as Spotify and My Little Box. This phenomenon has expanded and is now dominated by Amazon with Prime. Initially, the subscription only gave the right to free delivery. Now, for €69.90 per year, you can get:

free delivery within one working day
access to Prime Video, the brand’s video on demand platform
Amazon Prime Music
Prime Gaming, which includes a paid subscription to Twitch and content on PC games
Amazon Photos, unlimited photo storage
Prime Reading: a catalogue of books on Kindle
access to branded flash sales 30 minutes before non-subscribers
Access to Prime Days, special days for Prime members only

For €69.90 a year, you get free delivery on all your purchases, a photo storage service, a streaming platform, free music, free books, exclusive promotions… In addition to attracting new buyers, Amazon has a very clear goal: to monetise existing customers and turn them into loyal customers. All of this, via a very aggressive strategy, that clearly works: a recipe thanks to which Amazon has become the daily go-to for millions of consumers.

The numbers speak for themselves:

→ over the year 2022, in France, e-shoppers who were Amazon customers but not Prime subscribers had a purchase frequency of 16.5 with the American giant. Their average basket was €57.21, for an average annual spend of €944.91.
→ for Prime subscribers, still in France, the figures are quite different:

their purchase frequency rises to 71.4
they make nearly 6 purchases per month on the platform, more than one per week.
their average shopping basket is slightly lower: €52.02, a difference that can be explained in particular by the fact that delivery costs are free

And with more than 70 annual purchases on Amazon, their annual spending is soaring: Prime members spent an average of €3,712.54 at Amazon in 2022.

Amazon Prime: the new standard in customer experience

Prime is the cornerstone of Amazon’s strategy. It’s the solution that brings down the shopping cart abandonment rate, which often happens at the same time as the delivery charge appears. Except when they are free.

For Amazon, making a lasting connection and building customer loyalty is paramount.

With over 70 purchases per year, the brand has a very good view of its Prime customers’ desires. Amazon can improve the quality of its recommendations, which generates more orders. The more customers buy, the more interest brands have in being listed on Amazon’s marketplace. The range of products offered by Amazon expands, attracting new customers, and generating additional spending for existing customers. And the more customers place orders on Amazon, the more Prime membership becomes a no-brainer.

A knock-on, and full-cycle effect that benefits Amazon’s strategy.

Amazon has become “The Everything Store,” an e-commerce site where you can buy quite literally everything. Today, Prime subscribers do almost half of their spending at Amazon; 46% to be exact. Non-subscribers, on the other hand, make only 6% of their purchases at the American giant. By putting its Prime loyalty programme at the heart of its strategy, Amazon is redefining the rules of e-commerce and consolidating its position as market leader.