Seeking Alpha

Amazon estimated to have 16.7M Prime subs; Janney a fan of Kiva's robots

  • Research firm CIRP estimates Amazon (AMZN -0.8%) now has 16.7M Prime subs, up 72% from a year-ago level of 9.7M. The firm also reports 93% of Prime subs responding to a survey said they're happy with the service, and plan to renew.
  • The estimate meshes with a recent report from Dan Rayburn, who was told by an Amazon insider the e-commerce giant ended Q3 with 15M+ Prime subs.
  • Amazon's October decision to hike its minimum free shipping order size to $35 from $25 could be fueling a pickup in Prime subscriptions (free two-day shipping for $79/year, no order minimum). More recently, Amazon struck a deal with the USPS to enable Sunday delivery for Prime subs in major metro areas.
  • If CIRP's estimate is reasonably accurate, it means close to 17M Amazon accounts now have access to Prime Instant Video (whether they're using it is a whole other question). Rival Netflix (NFLX -0.2%) ended Q3 with 31.1M U.S. streaming subs.
  • Separately, Janney estimates Kiva Systems' robots could lower Amazon's per-order fulfillment costs by 20%-40% from a current $3.50-$3.75. That, in turn, spells estimated cost savings of $458M-$916M/year.
  • Amazon mentioned in its Q3 report it deployed 1,382 Kiva robots during the quarter in three fulfillment centers.
Comments (14)
  • Paulo Santos
    , contributor
    Comments (18182) | Send Message
     
    It's always amazing how they manage to speculate about all of this, but not about the impact of -- announced -- shipping charges increases of 4.9% for 2014, which would amount to a much less speculative $298 million in additional costs.
    9 Dec 2013, 03:23 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1576) | Send Message
     
    Paulo - I have to ask. What is your emotional attachment to Amazon? There are other stocks out in the market you can short. Let this one go...
    9 Dec 2013, 04:28 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (18182) | Send Message
     
    There are none above $100 billion in market cap with little prospect of high profits. And I don't want to short most stuff in the market while the Fed is printing, especially lowish market capitalizations.
    9 Dec 2013, 07:05 PM Reply Like
  • investingInvestor
    , contributor
    Comments (1320) | Send Message
     
    This is great news. I view Amazon Prime and Cosco membership as brilliant marketing on their parts.

     

    Amazon Prime has sooo many benefits that it easily pays for itself (so does Costco membership if you plan to shop regularly).

     

    Prime is a source of big data for Amazon to crunch. Amazon really tries to tune its customers' experiences. Amazon could share data with third parties. Amazon already shares customer feedback with third parties.

     

    At the top of my watch list, the epic mashup of IoT with robots. E.g., Amazon vs Google. In this corner, we have Jeff. And, in the other corner, we have Larry.

     

    It seems Amazon has been wired up for the IoT and robots. Thousands of wheeled robots racing from shelf locations to packing locations. Automated routing and congestion management. Automated conveyors sending packages from packing locations to loading doors. Humans receiving real time notifications on wearable devices, of service requests.
    9 Dec 2013, 03:49 PM Reply Like
  • Illuminati Investments
    , contributor
    Comments (3400) | Send Message
     
    There's a subtle difference, in that the more Costco members shop, the more money they make off their customers since all their infrastucture and logistical costs are essentially fixed, whereas Amazon is subsidizing the shipping costs of Prime members every time they order something, not to mention giving them free access to streaming video content that they spent billions to acquire. I am a happy user of both memberships, but I certainly know which business I'd rather own, and in fact do.
    9 Dec 2013, 04:08 PM Reply Like
  • paulnj
    , contributor
    Comments (10) | Send Message
     
    Sales are up 23% from last year, Prime is up 73% . Profit is down they have 1382 Kiva robots. How does this all work out?
    9 Dec 2013, 04:13 PM Reply Like
  • HZLIU
    , contributor
    Comments (212) | Send Message
     
    Amazon has to make profit out of Prime Member by charging them higher price for everything sold at Amazon. There is no free lunch for Prime Member. It just no way to give Prime member all the goodies (rent book, video...), two day shipping and lower price. You should not expect to get lowest price at Amazon in future. For non Prime members, they could deal with $35 or even $50 minimum. Any thing below the minimum, the saving is very limited. You can get faster delivery from Walmart anyway.
    9 Dec 2013, 05:00 PM Reply Like
  • Illuminati Investments
    , contributor
    Comments (3400) | Send Message
     
    They can still offer the lowest prices, Amazon shareholders will just subsidize Prime shipping costs in terms of lost potential earnings, and since the stock doesn't trade based on earnings anyway, everyone wins!
    9 Dec 2013, 05:10 PM Reply Like
  • chopchop0
    , contributor
    Comments (3228) | Send Message
     
    "They can still offer the lowest prices, Amazon shareholders will just subsidize Prime shipping costs in terms of lost potential earnings, and since the stock doesn't trade based on earnings anyway, everyone wins!"

     

    Pretty much.

     

    AMZN is the corporate equivalent of China.
    9 Dec 2013, 08:36 PM Reply Like
  • ConservativeOutperformer
    , contributor
    Comments (542) | Send Message
     
    They lose money on my subscription. I'm paying $40 for a Prime membership and I only use the site when they have by far the lowest price. I saved $200 on a $500 jacket, which was not discounted anywhere else and saved $200 on a $1500 spotting scope, which was not discounted anywhere else. Both items were listed for 1 day and immediately reverted back after my purchase...... On average, I've saved over $150 a year with AMZN, and I paid $40 total (this is my first year of Prime) to do it while getting trinkets delivered to my door for free in 2 days and watching dozens of movies that would cost at least $1 at Redbox.

     

    I wouldn't doubt that a lot of suckers use AMZN for everything, regardless of price, but a lot of clever individuals can really make out well off these money losers.....

     

    Good luck!

     

    P.S. In regards to the Costco comparison, there is none. COST would make money on me the moment I purchased a membership. I'm a single person, and unless I buy an enormous percentage of my overall groceries there, I would not make my money back. It locks me in from the start and I have to keep shopping there. Otherwise it doesn't add up. With AMZN I get a NFLX like service for less money and I get free shipping thrown in with everything I buy. My rudimentary math puts me at least $150 in the black every year with AMZN. Get it while you can, because sooner or later you can't.....
    9 Dec 2013, 07:08 PM Reply Like
  • pippinjonesowns
    , contributor
    Comments (4) | Send Message
     
    You dont understand. Amazon takes 15% of every sale from their sellers. By paying 80 dollars a year for free shipping, all youre doing is guaranteeing that youll spend more money in order to justify the $80 a year for free shipping. Amazon is creating customers for life. Average Prime Customers spend more than twice what non prime customers spend each year.
    10 Dec 2013, 11:13 AM Reply Like
  • Illuminati Investments
    , contributor
    Comments (3400) | Send Message
     
    I don't think products sold by other sellers on Amazon Marketplace are eligible for Prime shipping, so I'm not sure the first part of your thesis makes sense, and I think you might have the second part backwards, since the average customer probably becomes a prime member because they buy more and want free shipping on everything, they don't become a prime customer and then automatically start buying more stuff.
    10 Dec 2013, 11:37 AM Reply Like
  • pippinjonesowns
    , contributor
    Comments (4) | Send Message
     
    By buying a prime membership people naturally want to get the most out of their money, so they always just try to buy more stuff on amazon instead of other places to get the best value. Also, any seller on Amazon can use their warehouses and have Amazon ship for them. They pay a small fee for the warehouse space but Amazon pays the 2 day shipping costs.
    10 Dec 2013, 02:24 PM Reply Like
  • chopchop0
    , contributor
    Comments (3228) | Send Message
     
    "By buying a prime membership people naturally want to get the most out of their money, so they always just try to buy more stuff on amazon instead of other places to get the best value. Also, any seller on Amazon can use their warehouses and have Amazon ship for them. They pay a small fee for the warehouse space but Amazon pays the 2 day shipping costs."

     

    Prime is worth it only to the degree that the price and convenience outweighs my other options. If I can get something cheaper elsewhere, and it's not a hassle to get it, I will take that route.
    10 Dec 2013, 03:26 PM Reply Like
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