Amazon: New Trends Are Not Priced In

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From Seeking Alpha:

Amazon’s subscription revenues have kept on growing at a rapid pace for the past few quarters. In the latest quarter, subscription revenues grew by 52% on a YoY basis. The secret behind Amazon’s success with this segment could be its ability to get a high retention rate even after increasing the cost of Prime membership. The increase in sales of Echo devices has also helped the company in improving revenues from its Amazon Music Unlimited subscription.

While the subscription revenues have been increasing, the growth in shipping costs is trending downwards. In the past few quarters, shipping costs were growing at over 30%. However, in the recent quarter, growth in shipping costs was only 22%. We could see a further reduction in shipping costs as the number of fulfillment centers increase and the online store sales grow at a lower rate.

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Prime membership has given Amazon an unbeatable moat. It would be very difficult for any company to build similar subscription numbers in e-commerce segment. According to a CIRP report, there are close to 100 million Prime members in US alone. Just three years back, this number was less than 50 million. The rapid growth in membership shows the increase in value proposition for members.

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According to the census bureau, there are close to 125 million households in the US. This means that Prime membership is reaching four-fifth of the total households. It should be noted that while the absolute number of members has not increased by more than 10% in the last year, the subscription revenues have increased by over 50%. 

Link to the rest at Seeking Alpha