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Amazon Shifts Prime Pantry Service to Subscription Model

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Per Bloomberg, Amazon.com, Inc. (AMZN - Free Report) is transforming its Prime Pantry service to a subscription-based model. The service will reportedly cost $5 per month instead of $6 per box, which the current customers pay. However, customers not willing to subscribe to the new model may have to shell out $8 per box.

Moreover, to make the subscription model popular Amazon is likely to come up with exciting offers like free delivery on orders worth at least $40.

The move is expected to boost Prime Pantry subscriber base. The online service offers packaging and delivery of non-perishable consumer products to Amazon’s Prime members.

Per Bloomberg, which quoted e-commerce data analytics firm Stackline, Prime Pantry is expected to generate revenues of $572 million in 2018. Further, the transition to subscription model is likely to boost Amazon’s competitive position against the likes of Walmart (WMT - Free Report) and Target (TGT - Free Report) in the long haul.

In the last quarter, Amazon garnered $3.17 billion revenues from subscription services, up 49% year over year.

 

Amazon Prime to Continue Drive Growth

Amazon has a solid loyalty system in Prime and its FBA strategy and content addition continue to boost Prime subscriber base. In 2017, there were more than 5 billion shipments worldwide which took place via Prime.

Per the Morgan Stanley estimates, Prime subscribers will account for 51% of the United States population in 2018, up 45% from 2017.

The company continues to provide new offers Prime members, which has been a major driver behind the rapid adoption. Last month, Amazon started giving 5% cash back benefit to prime members who use Amazon Prime Rewards Visa card while shopping at any Whole Foods store.

Moreover, the company recently announced a low-cost version of its prime membership program for Medicaid recipients.

Further, Amazon’s focus on expanding Prime offerings in international markets is positive. Recently, the company launched Prime services in the Netherlands, Singapore and Luxembourg.

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold).

Investors interested in the broader retail-wholesale sector can consider Stamps.com (STMP - Free Report) . The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Stamps.com is currently pegged at 15%.

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