Amazon Prime growth is slowing, analysts say

Customers shop in Amazon’s new store in New York,
Amazon 4-star.
AP/Mary
Altaffer

• There’s new evidence buried in Amazon’s
  latest earnings report that fewer people are signing up for
  Prime. Amazon raised the price of a Prime membership earlier
  this year, to $12.99 a month or $119 a year. 
• The way Amazon accounts for revenue from Prime
  subscription fees in its earnings has changed this year,
  which 
  provides a look at how Prime
  membership has slowed down, according to analysts at
  Normura.
• Decelerating Prime growth is something to watch, as the
  membership is highly valuable to the company’s revenue from
  retail sales. The gap between purchases made by Prime customers
  and non-Prime customers
  may be getting wider, according to a recent report by
  Consumer Intelligence Research Partners.
• Amazon CFO Brian Olsavsky said during an earnings call
  with analysts that the company was happy with Prime’s
  progression. 

Amazon‘s
Prime machine might be slowing down.

Buried in Amazon’s latest earnings report is evidence that fewer
people are signing up for Prime. 

The way Amazon accounts for revenue from Prime subscription fees
in its earnings has changed this year, which provides a look
at how Prime membership has slowed down, according to analysts at
Normura.

“The new straight-line approach to recognizing Prime Fees
provides a look at Prime Membership growth, which by all accounts
does appear to be decelerating,” Nomura analysts said in a note
to investors on Friday.

This comes after a price increase earlier this year, when Amazon
bumped up the cost of a Prime subscription by $20, to $119
yearly. Amazon also raised the price of a monthly subscription to
$12.99 a month in January. 

During the company’s third-quarter earnings call, in response to
an analyst’s question about the effect of the price increase on
Prime memberships, Amazon CFO Brian Olsavsky told analysts that
the company was satisfied with the numbers.

“We’re very pleased with the renewal data and annual sign
up data that we’ve seen,” he said. “Since then, program remains
very strong, both in membership and engagement, and a lot of our
video content, music and shipping definitely, as well as other
Prime benefits. We just continue to see that ramp up, not only in
the US, but in other countries.”

It isn’t the first signal that Prime growth has stagnated.
According to a recent report by Consumer Intelligence Research
Partners, Prime’s
membership growth appears to be slowing in the United States.

The firm estimates that there are a total of 97 million Prime
subscribers in the US. Over the past 12 months, that number only
grew 8%, which is the slowest rate recorded since CIRP started
tracking Amazon Prime subscriptions in 2012.

“Prime membership growth has clearly flattened,” Josh Lowitz, a
cofounder at CIRP, said in a press release about the report.
“Amazon Prime membership has now spread far beyond the early
adopters who were presumably the most committed Amazon shoppers.”

Decelerating Prime growth is something to watch, as the
membership is highly valuable to the company’s revenue from
retail sales. Prime members have long spent more and shopped more
often on Amazon.

But now the gap between Prime customers and non-Prime customers
may be getting wider, according to CIRP.

While Prime members buy an average of $1,400 a year worth of
stuff on the website, regular customers only spend $600. That’s a
wider gulf than
was reported by CIRP last year, when Prime customers spent an
average of $1,300 and other customers spent $700.