Is Prime Membership Really Just About Fast Free Shipping?
A couple of days ago, Nicole Nguyen of the Wall Street Journal asked “Is the $139 Prime Subscription Still Worth It?” She noted the recent $2.99 added charge for ad-free Prime Video among other ways that Amazon has nipped away at the generosity of the bundle of Amazon Prime services. (She also quoted some CIRP analysis.)
Last week, Doug Herrington, CEO of Worldwide Amazon Stores published a blog entitled “Amazon delivered to Prime members at the fastest speeds ever in 2023—and is working to get even faster in 2024.” The article touted Amazon’s success in shortening the delivery times for Prime member orders, with significant increases in same-day and next-day delivery.
CIRP has been considering these issues for a very long time. Most recently, we published a report that looked at Prime vs. non-Prime order shipping speed, in December. We noted that in the 12 months ending in September 2023, 24% of Prime orders in the US were delivered same-day or next-day, and 75% were delivered within two days. For comparison, only about 13% of non-Prime orders were delivered within two days.
It is interesting to note that Amazon discussed only Prime member order shipping speed, not the service level for the other one-quarter of Amazon shoppers without a Prime membership. We know the importance of Prime to Amazon, and observers like Nicole Nguyen are asking whether it is worth the investment. It is worth staying with the approximately three quarters of Amazon shoppers paying $139 annually (or $14.99 monthly).
We think that after 19 years, Amazon has determined that the original offering, fast free shipping, is really all that matters. The array of other Prime benefits are “nice to have”, but shipping is key. Further, we think that Amazon’s investment in logistics and their extensive proprietary shipping operation makes same-day, next-day, and two-day delivery the deepest and widest moat in the array of Prime member services.
Of course maintaining that service level is easier in some places than others. Urban Amazon Prime members enjoy a great advantage over their rural, and even suburban counterparts. (Chart 1).