Amazon 'Prospered' in Pandemic by Gaining More Prime Members: CIRP
Amazon customers’ shopping behavior -- Prime and non-Prime -- didn't change significantly during the COVID-19 pandemic compared with earlier periods, said a Consumer Intelligence Research Partners report dated July 15 and released by the company Monday. Amazon “prospered during the pandemic” by getting more customers to shift to Prime, resulting in higher shopping frequency and increased loyalty, it said.
Amazon Prime members shop about twice as often as non-Prime shoppers, CIRP said. They look to amortize their membership fees -- $120-$140 depending on a monthly or annual membership -- by ordering more frequently and taking advantage of the free shipping benefit, it said. Visits per year were 25 for Prime and 15 for non-Prime shoppers as reported in June 2019 and June 2020; Prime members added two annual visits in 2021, said the June survey, while non-Prime customers remained at 15.
Spending fell from $47.97 per visit on average in June 2019 to $42.05 for Prime members; to $38.27 for non-prime customers from $42.54 in 2019. Membership grew steadily for the 12 months ended June, with Amazon adding about 30 million Prime members during the span, it said.
Amazon is well-positioned to deliver revenue results at or above the high-end of guidance, Wedbush analyst Michael Pachter wrote investors Monday, before the company's Thursday Q2 report. Pachter referenced a successful Prime Day event, continued shelter-in-place behavior driven by the delta variant of COVID-19 and a recovering economy. “Despite a gradual reopening of the economy, we believe Amazon continued to be the primary beneficiary of the pandemic and captured sustainable ecommerce share gains during the quarter due in part to a resurgence of COVID-19 infections,” he said.
An April shareholder letter from then-CEO Jeff Bezos, his last before handing over the reins to Andy Jassy (see 2104150062), pegged Prime membership at over 200 million globally. Wedbush predicted continued demand for Amazon shopping as e-commerce trends that “reached new heights” during the pandemic become “normalized.”
Amazon will also benefit from the ongoing migration toward cloud storage, Pachter said. Amazon Web Services will continue to grow at a “high clip” this year, rising nearly 29% from 2020, due to a shift toward cloud storage, partnership agreements, and international expansion, he said.
Amazon had to pause plans for the Prime Day in Canada and India due to the impact of COVID-19. Last week, it said it will hold Prime Day in India Monday and Tuesday and canceled the event in Canada to focus on the health and safety of its employees, customers, and selling partners, Pachter noted.
Citing “strong Prime member growth, more habitual purchases of items like groceries, and higher consumer spending stemming from job growth,” Wedbush believes Amazon will deliver results that exceed guidance for the fourth consecutive quarter, projecting Q2 revenue of $116 billion. Revenue growth is likely to decelerate in the second half, Pachter said, estimating 27% year-on-year growth for the year vs. 38% in 2020 and 20% in 2019.