Amazon Prime a key differentiator for the US e-commerce firm in India

Amazon Prime now accounts for nearly a third of Amazon India’s active customer base. Prime subscribers spend at least 15% more than non-Prime customers and place more orders on an average every month.

Bengaluru: Amazon’s flagship membership programme Prime, which has helped the e-commerce giant lock in millions of online users in the US, is proving to be a key differentiator for the retailer in India as well, a report said.

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Data from the report by market researcher RedSeer Consulting, shows the number of Prime subscribers in India rose rapidly during the October-December quarter, reaching 5-6 million at the end of December.

Prime now accounts for nearly a third of Amazon’s active customer base with 25-30% of Indian customers opting for it, the report said. These estimates include paying and non-paying subscribers.

Prime subscribers spend at least 15% more than non-Prime customers and place more orders on an average every month, the data shows. They seem to be more satisfied as well: according to RedSeer, average Net Promoter Score (NPS)—an indicator of customer satisfaction—for Prime customers in India was 40% against 24% for non-Prime customers.

In less than nine months since Prime launched in India, it accounts for one out of every three orders that Amazon delivers to customers—highlighting how consumers are increasingly paying for quicker and more reliable deliveries and hence are increasing their online spending budgets on platforms that offer such membership programmes.

Prime has become a key lever for Amazon in its battle against arch-rival Flipkart. A significant part of Prime’s growth is also being driven by its online video streaming service, which competes with Netflix and Hotstar.

The Indian numbers mirror a phenomenon that Amazon first witnessed in its home market, the US, when it first launched Prime in 2005. Over the last decade, Prime became one of the biggest levers of Amazon’s growth in the US, as the online retailer sold more to existing customers, who typically ended up shopping more from Amazon after signing up for Prime.

“We’ve seen a big rise in frequency as well as a big lift in actual order values from Prime customers,” Akshay Sahi, head of Amazon Prime in India, said in an interview with Mint earlier in April. “What happens is, apart from mobile phones, any of the other categories are not one-time purchase categories. Because you just keep buying more and more of those things. Your fashion budget will move more towards Amazon, your electronics budget will move more towards Amazon, your consumables budget moves more towards Amazon because of the loyalty you have and the experience you enjoy and the programme that you’re a part of.”

Last July, Amazon India launched its annual Prime membership programme in more than 100 cities, offering one-day and two-day delivery on hundreds of thousands of products and exclusive discounts for an initial price of Rs499 per year.

Prime was the single biggest-selling product among the 15 million units sold on Amazon India during a five-day sale in October. Amazon expanded the service by adding video content in December through Amazon Prime Video, pitting it against Netflix and Hotstar.

Prime’s success in India may force arch-rival Flipkart to re-think its strategy towards paid subscription services. So far, Flipkart has not actively promoted its own loyalty programme for consumers, as the e-commerce firm privately believes that Indian shoppers typically don’t care or pay for delivery and convenience or content.

“Flipkart is missing out big-time by not promoting its own membership service as aggressively as Amazon. They still have an opportunity to educate customers and offer them that option of quicker and cheaper deliveries, but they have to get into this game quickly,” said Harminder Sahni, founder and managing director, Wazir Advisors, a consulting firm.

Livemint : April 25, 2017

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