Amazon Prime

In 2005, Amazon launched Amazon Prime, a two-day delivery service for 1 million eligible products for an annual flat fee of $79, with a one day delivery upgrade for $3.99 (see Exhibit 3b).55 Free video streaming was added to the Prime offering in 2011 (see Digital Media below). Prime membership grew rapidly, reaching “tens of millions” by 2013, by which time more than 20 million items were eligible. The fee was raised to $99 in 2014, and free music streaming was added. By 2015, 10 years after launch, over 30 million items sold on Amazon’s website were eligible for Prime delivery, Sunday delivery had been added, and Free Same-Day Delivery was offered on hundreds of thousands of items in 35 cities worldwide. Scot Wingo of consultants ChannelAdvisor estimated that Prime members spent four times the amount of non-Prime members and accounted for half of all spending at Amazon.
In December 2014, Amazon launched Prime Now in Manhattan, New York, offering Prime members a range of 25,000 daily essentials for delivery in two hours for free or one hour for a charge of $7.99. It was rolled out rapidly to major cities around the world. By the end of 2015, it was offered in more than 30 cities. Independent drivers made the deliveries using their own vehicles, summoned on a mobile app in much the same way as Uber offered taxi rides.
After Amazon’s acquisition of luxury grocer Whole Foods in 2017, Prime members were offered special discounts when shopping at the store, adding another benefit to the long list of benefits available.
By the end of 2017, Prime members exceeded 100 million worldwide, and they acquired 5 billion items during the year. Over 100 million items were eligible for Prime delivery in the United States. Prime Free Same-Day and Prime Free One-Day delivery were available in 8,000 cities, and Prime Now in 50 cities. In May 2018, the annual fee was raised again to $119.65 This move triggered much debate on what the package of services was worth. Creditcards.com estimated the annual benefits at $1,166.66
In February 2019, market research firm Consumer Intelligence Research Partners (CIRP) reported that Prime members had reached 100 million in the US at the end of 2018, up from 90 million the year before. Prime members spent $1,400 per year on average compared to $600 for non-Prime members.