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A new report says Amazon makes so much money off Prime customers that the company could drop the annual fee by dozens of dollars and still come out ahead.
To put that figure in context: Amazon’s average operating income last year per each of its 182 million total customers came to less than $10. In other words, every Prime member is about eight times as valuable to Amazon as a non-Prime member. Put yet another way: More than one-third of Amazon’s profits before interest and taxes came from fewer than four percent of the people who buy stuff on Amazon.
This story brings forward an interesting aspect of Amazon digital transformation of shopping. Amazon goes beyond the online catalog shopping and into a membership model that moves one-time price sensitive shoppers into everyday ones where margins are much higher.
Doing so, Amazon increases volumes to bring economies of scale that make them even more competitive with established brick and mortar retailers, which are hard pressed to show the same profitability because they must have *both* a competitive supply chain *and* physical stores. Wow.