According to an article on cnet.com (March 12, 2013), Morningstar analyst R.J. Hottovy estimates the number of Amazon Prime Buyers at over 10 million. The Amazon Prime account is a special membership where customers pay a $79 annual fee to receive benefits including free 2-day shipping on items fulfilled by Amazon, instant video, and free Kindle downloads. About a third of Amazon's operating income is attributed to Amazon Prime.
Prime membership has almost doubled in the last 18 months. The large increase could be due to Amazon offering a free trial Prime account to customers purchasing new Kindle tablets. It is estimated that 30-40% of the free trials have converted to paid memberships. Hottovy further estimates that Prime accounts will increase to 25 million by 2017. Research indicates that Prime customers spend double what non-Prime customers spend.
Hottovy wrote, "We believe the appeal of Amazon Prime is undeniable, as it adds expedited shipping to Amazon's already powerful combination of low prices, wide selection of products, and unrivaled customer service. Prime strengthens Amazon's network effect, as the explosive growth in Prime memberships the past few years entices merchants to offer a greater number of Prime-eligible merchandise."
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