Kelly Evans: Who Needs Prime?

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I’m not saying I don’t need Amazon. But do I still need Amazon Prime?

I’ve apparently been a member since 2005 – that was basically the beginning. I think it was $ 79 a year back then. Now it’s up to $ 119. Not terrible; that’s basically 2.5% a year inflation, more or less the general rate.

But in 2005 I was a college student in a pretty rural place. Amazon was a cheap and convenient alternative to a 45 minute drive to the mall or The Container Store, and I used it for everything the whole time. I’m a mom and a homeowner now, and the convenience of Amazon is reaching the point where it hurts more than it helps our lives. The more things randomly pop up each week, the less efficient our household is.

Plus, so much of what we need is groceries (and the less urgent things we could still order from Amazon without Prime), and as much as I love roadside pickup from Amazon Whole Foods, it quiet is not as efficient as shopping at Costco where we are Even paying members. In fact, Bezos is said to have got the idea for Amazon Prime (whose business model investors love) from Costco’s Jim Sinegal.

So we decided last month – bye Amazon Prime, hello Costco, even if that means we have to take three children with us a few times a month. I mentioned this here and there to see if that sounds crazy to people. Amazon reiterated in its earnings last month that it believes it is creating at least $ 630 annual value for people as it takes 15 minutes to buy online compared to a one-hour drive to the store. But I think we actually could to save at least as much by buying more carefully now.

I realize that while we were ziggling the rest of the world was shaking (I should add, we don’t watch Prime Video, which a lot of others do). According to Cowen, Amazon added 35 million Prime members worldwide last year when the pandemic destroyed stationary travel. Cowen analysts now expect Amazon to have 67% household penetration in the US, and that market strength will likely increase the cost of Prime membership again next year.

Argus believes these new members will be incredibly persistent – “We believe there is no going back for Prime members,” they wrote earlier this month, “who may be in shock when faced with limited inventory and uneven sizes shops are faced in physical retail. “To which I would simply say, You can also order from Amazon without Prime! You can also order from Walmart. Or goal. There is much more “one-stop” online shopping today (and rivals have roadside pickups!)

From this point of view, the plans reported by Amazon to open “Department stores“Makes a little more sense – they seem to have tried everything to crack the nut of physical presence. I asked retail advisor Jan Kniffen about this the other day during Rapid Fire.” Amazon has been a pretty bad brick and mortar retailer so far, he said. “and they’re not growing as fast online anymore.”

Maybe they are, maybe not, but retail remains Amazon’s overwhelmingly important line of business. Argus said the company had $ 98 billion in retail sales last quarter, compared to less than $ 15 billion in the Amazon Web Services cloud business. However, the cloud business is much more profitable.

Who knows if there is a real risk of attrition with Prime membership, which would seemingly undermine a large part of the bull story on Amazon. Retail profit margins are less than 4%, according to Argus – and would probably not be nearly as attractive to investors without Prime.

I only know that the big experiment “Sub-Prime” (“Non-Prime”?) Is now running for our household. Let’s see how long we can hold out.

See you at 1pm!

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans


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