Bengaluru: Amazon Prime membership programme has become an important lever for the company in its battle against arch-rival Flipkart, accounting for nearly 30% of all orders on Amazon India.
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 the likes of Netflix and Hotstar.
“We’ve seen a big rise in frequency as well as a big lift in actual order values from Prime customers,” said Akshay Sahi, head of Amazon Prime. “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.”
Since January, Prime subscribers have comprised nearly a third of all orders placed on the platform, a massive jump for a service that was introduced less than nine months ago.
Rival Flipkart, too, has a loyalty service but the company isn’t pushing it aggressively. Flipkart executives say privately that most Indians are unlikely to take to Prime. Indians are disinclined to pay for delivery and convenience or content, they say.
However, Amazon is betting big on it and Prime’s initial popularity has convinced the firm that the programme will be one of its most significant weapons against Flipkart.
In the US, Amazon Prime customers spend a lot more on Amazon than they did previously, they buy products they weren’t buying earlier and they also tend to reduce their spending on other platforms. That’s why the service, if it’s adopted by a large number of shoppers, is a double whammy for Amazon rivals.
Amazon has kept the annual price of the Prime subscription at Rs499, which is half of the marked price of Rs999. Sahi said Amazon will not increase the price any time soon. He declined to disclose the number of Prime subscribers.
“You have to let the benefits bake. It’s just been a few months since video was launched. You want customers to experience the benefits; otherwise you risk killing the programme,” Sahi said.
Apart from offering Prime customers fast delivery and deals on thousands of products, Amazon is also fast expanding its video business, which is available on a separate app. It offers popular TV shows and movies in English, Hindi and a few regional languages.
“We’ve doubled Prime subscription in India since video launched,” said Nitesh Kripalani, head of Prime Video in India.
“If I look at the paid subscriber base, one in three paid members are consuming video which is a fairly high percentage. We are among the top five entertainment applications in India already and we have doing it consistently this quarter, even after our launch,” Kripalani added.
Amazon, which has spent more than $2 billion of the $5 billion in capital it has committed so far to its Indian business, is running neck and neck with Flipkart at the top of India’s e-commerce market. There isn’t much separating the two firms. Prime could hence become crucial for Amazon if the company is successful in persuading a large number of customers to sign up for it.