What started out as a subscription that provided free two-day shipping now includes streaming movies and TV, unlimited music streaming, unlimited online photo storage, thousands of free e-books, and special pricing on certain items in the online store. Last week Amazon added a free six-month subscription to the national digital version of the Washington Post for Prime members, before charging $3.99 a month for the paper now owned by Amazon CEO Jeff Bezos.
The knocked-down Prime membership offer is another example of the Amazon way of doing business: make customers an offer that is too good to refuse, expecting they’ll pay the company back with more purchases. It may not be a shareholder’s dream because profits are razor thin at best, but Amazon understood early that what matters in the online world is scale, and growth is what the company has always focused on.
Unfortunately outsiders are forced to guess at Prime’s membership numbers because Amazon does not reveal them. Recent estimates suggest 25 million to 35 million subscribers.
Amazon’s revenues have grown from $15 billion in 2012 to $26 billion last year and look to be on track for at least $30 billion this year. That would indicate that Amazon took the right tack 20 years ago, and the one-day sale of Prime memberships indicates that Amazon will stay on that course until customers give it a reason to change.
Shares traded down 2.2% at $536.13 shortly after the noon hour Tuesday. The stock’s 52-week range is $284.00 $580.57 and the consensus price target is $647.63.
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