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Amazon Prime Targets Lower Income Group with Price Rebate
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Amazon.com, Inc. (AMZN - Free Report) has made yet another push to outshine Wal-Mart (WMT - Free Report) and drive the popularity of its Prime membership program to boost sales.
The retail giant yesterday announced a discounted monthly price for Prime members who receive government assistance. While the subscription usually costs $99 a year or $10.99 per month (for those who do not pay upfront), the special price is $5.99 per month.
Greg Greeley, Vice President of Amazon Prime stated, “We designed this membership option for customers receiving government assistance to make our everyday selection and savings more accessible, including the many conveniences and entertainment benefits of Prime.”
We note that Amazon has underperformed the Zacks Internet-Commerce industry over the last one year. The stock gained 38% compared with the industry’s gain of 47.2%.
Despite this underperformance, we believe there are a lot of factors that could turn the wheels in favor of Amazon. These include expansion of Prime, its grocery initiatives and efforts around AWS. The company capitalizes on its execution strength, robust performance and technological prowess.
Eligibility Criterion: A Valid EBT Card
One needs a valid Electronic Benefits Transfer (EBT) card. An EBT card is generally used for disbursement of a number of government assistance funds including Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and Women, Infants, and Children Nutrition Program (WIC). However, the card cannot be used for making payments for subscriptions.
The discounted membership is valid for a year and can be applied up to four times. Going forward, Amazon will add eligibility for those who do not hold EBT but participate in government assistance programs. There is no annual commitment and a customer can cancel membership anytime.
Encroaching Wal-Mart’s Turf
We believe Amazon is trying to tap the lower income group with this move, a market that has been served by Wal-Mart over the years. Wal-Mart receives a considerable portion of its annual revenues from purchases made using SNAP provided funds and spending done by SNAP recipients.
Apart from giving it a deeper push into the e-commerce market and yet another way of competing with Wal-Mart, the move is expected to give Amazon a way to handle the apparent problem of Prime saturation in the U.S.
Amazon faces tough competition from Wal-Mart, Alibaba (BABA - Free Report) and eBay (EBAY - Free Report) in the U.S. e-commerce space and is leaving no stone unturned to gain an edge. Recently, it launched Amazon Cash, a service that enables customers to add cash to their Amazon.com accounts using a barcode generated from its website. It is trying to cater to underbanked and unbanked customers and those who are reluctant to use cards for online shopping fearing cyber theft.
How Should Investors Look at Amazon Prime?
Amazon’s retail business remains very hard to beat on price, choice and convenience, Prime and Fulfillment By Amazon (FBA). Content addition continues to add selection to Prime memberships to get more people to Prime and generate increased sales for Amazon.
Prime memberships help in repeat sales of not just general merchandise but also media (books, music, video, etc). If Amazon is able to replicate its domestic success with Prime internationally, investors could see far more growth.
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early.
Image: Bigstock
Amazon Prime Targets Lower Income Group with Price Rebate
Amazon.com, Inc. (AMZN - Free Report) has made yet another push to outshine Wal-Mart (WMT - Free Report) and drive the popularity of its Prime membership program to boost sales.
The retail giant yesterday announced a discounted monthly price for Prime members who receive government assistance. While the subscription usually costs $99 a year or $10.99 per month (for those who do not pay upfront), the special price is $5.99 per month.
Greg Greeley, Vice President of Amazon Prime stated, “We designed this membership option for customers receiving government assistance to make our everyday selection and savings more accessible, including the many conveniences and entertainment benefits of Prime.”
We note that Amazon has underperformed the Zacks Internet-Commerce industry over the last one year. The stock gained 38% compared with the industry’s gain of 47.2%.
Despite this underperformance, we believe there are a lot of factors that could turn the wheels in favor of Amazon. These include expansion of Prime, its grocery initiatives and efforts around AWS. The company capitalizes on its execution strength, robust performance and technological prowess.
Eligibility Criterion: A Valid EBT Card
One needs a valid Electronic Benefits Transfer (EBT) card. An EBT card is generally used for disbursement of a number of government assistance funds including Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and Women, Infants, and Children Nutrition Program (WIC). However, the card cannot be used for making payments for subscriptions.
The discounted membership is valid for a year and can be applied up to four times. Going forward, Amazon will add eligibility for those who do not hold EBT but participate in government assistance programs. There is no annual commitment and a customer can cancel membership anytime.
Encroaching Wal-Mart’s Turf
We believe Amazon is trying to tap the lower income group with this move, a market that has been served by Wal-Mart over the years. Wal-Mart receives a considerable portion of its annual revenues from purchases made using SNAP provided funds and spending done by SNAP recipients.
Amazon.com, Inc. Net Income (TTM)
Amazon.com, Inc. Net Income (TTM) | Amazon.com, Inc. Quote
Apart from giving it a deeper push into the e-commerce market and yet another way of competing with Wal-Mart, the move is expected to give Amazon a way to handle the apparent problem of Prime saturation in the U.S.
Amazon faces tough competition from Wal-Mart, Alibaba (BABA - Free Report) and eBay (EBAY - Free Report) in the U.S. e-commerce space and is leaving no stone unturned to gain an edge. Recently, it launched Amazon Cash, a service that enables customers to add cash to their Amazon.com accounts using a barcode generated from its website. It is trying to cater to underbanked and unbanked customers and those who are reluctant to use cards for online shopping fearing cyber theft.
How Should Investors Look at Amazon Prime?
Amazon’s retail business remains very hard to beat on price, choice and convenience, Prime and Fulfillment By Amazon (FBA). Content addition continues to add selection to Prime memberships to get more people to Prime and generate increased sales for Amazon.
Prime memberships help in repeat sales of not just general merchandise but also media (books, music, video, etc). If Amazon is able to replicate its domestic success with Prime internationally, investors could see far more growth.
Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early.
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