From Jason Calacanis at Launch:
There are two types of people in the world: those with Amazon Prime and those without.
How you think about consumption, commerce and your personal time is radically different depending on if you’ve join the cult — yet.
And to be clear, Prime is a cult you will be joining.
At dinner parties and business meetings, I’ll frequently ask who has Prime and what they think of it. The number has grown from one or two in seven to three or four out of seven folks over the past five years. My circles tend to be people like you, which is to say more technically sophisticated (and good looking).
Prime is at a tipping point.
Amazon is doing so well with Prime it will not say how many Prime members it has acquired since the program launched in 2005. Prime launched in three other countries — the U.K., Japan and Germany — in 2007.
It’s around 5M according to the folks debating the issue on the interwebs. My guess is it doubles every 18 months or so.
One in three American households will have Amazon Prime (or have access to Prime) in the next four years.
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Like all great cults it’s enormously uplifting to be a member, provided you’re willing to throw away all free will and blindly accept the chosen one’s world view.
Our leader is Bezos.
His, and our, worldview is that consumption is a tyrannical and meaningless chore, and that life begins after you give your consumption to a third party you can trust.
. . . .
When you take the $79 leap into Prime, Amazon has you for life.
Once you’re in the cult you’re not leaving because leaving means you have the drudgery of having to drive to the store, finding the item you want, seeing if it’s in stock and then dealing with the most horrifying experience of all: retail employees.
According to most Prime members I’ve talked to, one of the greatest joys of the cult membership is never again having to deal with an apathetic teenager or bitter baby boomer forced to work in retail.
Ten years ago, a normal American would make two trips to the grocery store a week, as well as weekly or so visits to a drugstore and Blockbuster. Throw in a couple of monthly visits to some combination of Circuit City, Barnes & Noble, Kmart, Walmart, Create & Barrel, TowerRecords, ComputerLand, Frys, Costco and Bed, Bath & Beyond.
Add to that quarterly or semiannual visits to clothing stores like Old Navy, Gap, Saks or Barneys.
Let’s call it four to six hours of retail experiences a week, or 20 to 25 hours a month per household. Including holiday shopping you’re looking at 250 hours a year you’re inside a retail location experiencing some combination of time-regret, stress, boredom and/or annoyance.
. . . .
If you’re part of the cult, brands like Netflix, UPS, USPS, Paypal, Walmart, iTunes, Barnes & Noble, iPad, HTC, Target, Targus, Logitech, Best Buy, Dell, Belkin, Random House, Harper Collins are all becoming meaningless.
These are brands that will, in the near future, be largely if not completely replaced by the Amazon brand.
The list of areas where Amazon doesn’t compete keeps dwindling.
The only area I’d expect them to be where they’re not is in drugs — as in a pharmacy. Also, wines and spirits seem like a no-brainer, but I’m sure that has something to do with taxes and cross-state delivery.
Recently I bought a half-dozen of Amazon’s private-label products on my Kindle Fire including a Digital SLR backpack, a Kindle Fire case and a dual USB car charger.
All were awesomely priced, instantly delivered and provided satisfying experiences.
I didn’t have to think about these, I just one-clicked them into my life. And my life is now better.
I put my Listerine on automatic delivery every 60 days, and Amazon gave me 15% while taking it off my list of things to do and carry. Life is better.
Link to the rest at Launch
I love free shipping as much as the next person, and also find the level of service at Amazon to be fabulous, so I read with great interest Jason Calacanis’ latest post on the Launch blog, “The Cult of Amazon Prime.”
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Estimating Amazon has 5 million Prime members and that the total will double every 18 months or so – Calacanis’ Law? – he expects one in four American households to have Prime in the next four years, or between 30 and 40 million households (using 20 million accounts).
The trouble is, Prime costs Amazon a lot of money. And unless users become so loyal that they’ll tolerate less than the cheapest price on the web, it’s hard to see how the growth of the service won’t continue to suppress Amazon profits. As one sees here, awesome revenue growth hasn’t yet led to awesome profits.
. . . .
The problem, or at least one big problem, is all that free shipping. Annually at least, Amazon, which is tight with financial data, discloses its shipping costs, and thanks to Prime they’re rising faster than sales. For 2010, net shipping costs – total shipping costs minus what Amazon collects from dummies who aren’t in the Prime cult – was $1.39 billion. That was up 63% from the prior year. And sales in 2010 grew by only 40%.
. . . .
As we noted in a recent post on Amazon, the Prime cult may be creating the sort of moat that Warren Buffett likes to see. But does the moat encircle Amazon protectively, or is it instead a moat encircling bricks-and-mortar retailers into a market-share-losing ghetto?
Even if Best Buy and other competitors are forced out of business, it seems unlikely that others wanting to sell appliances or other stuff won’t replace them. At some point, Amazon will be forced to either raise product prices or raise shipping revenues. And that will disturb the cult. But, while it lasts, it’s beautiful.
Link to the rest at YCharts