money Amazon Prime now has 200 million members, jumping 50 million in one year
Amazon’s (AMZN) Prime service now has a whopping 200 million subscribers, CEO Jeff Bezos said in his annual shareholders letter on Thursday.
That’s a jump of 50 million new subscribers in roughly a year, less than half the time it took the company to hit the same milestone in 2019.
“We have more than 200 million Prime members worldwide,” Bezos wrote in the letter, which touched on topics ranging from the company’s Amazon Web Services (AWS) to its treatment of employees. “More than 1.9 million small and medium-sized businesses sell in our store, and they make up close to 60% of our retail sales.”
The last time Amazon released its Prime subscriber numbers was when it reported its Q4 2019 earnings in January 2020. At that point the company said it had 150 million members. It took the company two years to reach that mark after previously announcing that it had 100 million Prime subscribers in April 2018.
Amazon Prime costs $120 a year or $13 per month. While the subscription serves as a means to get consumers to purchase more goods through Amazon, it's also a means for the company to get its users hooked on its various services and products. After all, if you've got Prime, you'll likely buy an Echo device, which will keep you going back to Prime time and again.
Prime also includes access to Amazon Prime Video and Amazon Prime Music, which make Prime even stickier for customers. Then there's the service's shipping guarantees including two-day, and same-day Prime shipping, which has been a key differentiator for the company, and forced competitors like Walmart to build out their own delivery capacity.
In addition to Prime numbers, Bezos was sure to point out the benefits of Prime to both customers and shareholders, saying that while a typical trip to a brick and mortar store may take an hour, a purchase on Amazon takes 15 minutes. Without having to take time to go to physical stores, Bezos estimates that the average Prime customer saves 75 hours a year.
“That’s important. We’re all busy in the early 21st century,” he wrote.
"$126 billion of value creation"
According to Bezos, that time adds up to some serious price savings in the long term.
“Let’s value the time savings at $10 per hour, which is conservative,” he said. “Seventy five hours multiplied by $10 an hour and subtracting the cost of Prime gives you value creation for each Prime member of about $630. We have 200 million Prime members, for a total in 2020 of $126 billion of value creation.”
Amazon saw a massive boost from the pandemic, reporting its first-ever $100 billion quarter in Q4. The company also experienced its most successful holiday shopping period in its history, as well as its biggest Prime Day, which was moved from July to October due to the pandemic.
Of course, Bezos also touched on Amazon’s crown jewel: AWS. While the CEO admits that it’s difficult to provide exact cost savings for AWS customers, since it largely depends on how often they use the cloud service and each business’s overall size, Bezos estimates the company is able to cut businesses’ costs by roughly 30% versus traditional on premises servers.
“Across AWS’s entire 2020 revenue of $45 billion, that 30% would imply customer value creation of $19 billion (what would have cost them $64 billion on their own cost $45 billion from AWS),” he wrote.
Amazon’s rise has put a target on its back, with some lawmakers accusing the company of operating an illegal monopoly.
Last year, a report from House lawmakers found Amazon abused its dominant market position to hurt its competitors — including the millions of third-party sellers that do business on its site. That included taking data from its marketplace to locate top-selling items and create its own competing products, the report found.
Amazon also faces an antitrust investigation by the Federal Trade Commission and a collection of state attorneys general in the U.S. In November, the European Union’s competition watchdog, the European Commission, filed antitrust charges against Amazon alleging anticompetitive practices similar to those outlined by House lawmakers last year.
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