Amazon.com Inc. is the retailer behind the curtain driving U.S. retail growth. Need proof? Amazon is taking 24 cents of every $1 of retail sales growth in 2015. In the e-retail segment, Amazon’s dominance is even more commanding, with 51 cents of every $1 in sales growth going to the company, according to Macquarie Research investment analysts.
Analysts Ben Schachter and Kelly Dougherty estimate that by the close of 2015 U.S. retail sales will have grown 3.9%, from $2.401 trillion in 2014 to $2.495 trillion, a difference of $94 billion. For this analysis, Macquarie excluded the sale of automobiles, restaurant and bar sales, fuel and food and beverages, products not available for sale online or with a limited penetration.
Meanwhile, it estimates Amazon’s gross U.S. sales will have grown by $22 billion, or 33%, from $66 billion in 2014 to $88 billion in 2015. That estimate includes both sales by Amazon and by other merchants selling on Amazon.com. That $22 billion is equal to 24% of the total $94 billion in retail sales growth. The $88 billion means Amazon has nearly 4% of total U.S. retail sales, as defined above.
When factoring in the sale of packaged food and beverages—a product category that is growing rapidly online and the third-largest category of retail spending according to the U.S. Commerce Department—Macquarie estimates Amazon commands 19 cents of every $1 dollar in retail sales growth and 3% of total retail sales.
Looking only at e-commerce sales growth, Amazon will command 51% of U.S. web sales growth, up from 36% of growth in 2014 and 33% in 2013. (The 51% holds steady whether or not food and beverage sales are included.)
At the close of 2015, Amazon will have 26% of all U.S. web sales, up from 16% in four years ago. Schachter and Dougherty says more households signing up and using Amazon Prime is what’s driving the accelerating growth. “We believe that the accelerating gains are explained by one word: Prime,” Schacter and Dougherty say in their investment brief. It estimates Amazon generated $9 billion in gross sales from new Prime members in 2015.
Amazon Prime is the e-retailer’s membership program that costs $99 in the U.S. annually and includes two-day shipping, free streamed content and music, electronic books and other sweeteners, such as cloud storage for photos and video.
Amazon does not disclose how many Prime members it has, but Consumer Intelligence Research Partners (CIRP) estimated there were 47 million Prime members as of Sept. 30. The research firm also estimates Prime members spend $1,200 annually with Amazon versus $700 for those without Prime. Amazon is also doing a better job at getting consumers trialing Prime to convert and existing members to renew. CIRP says 70% of consumers who sign up for a 30-day free trial of Prime turn into paid members, and from April to June 95% of Prime customers whose subscriptions were set to expire renewed their memberships, up from 90% during the prior two periods.
Macquarie estimates that 25% of U.S. households are Prime members today, and calls that estimate “likely quite conservative.” It projects 50% of U.S. households will have Prime memberships in 2020. “We expect this Prime growth to lead to continued retail share gains and we expect that all the articles that were written in the late 1990s about what Amazon will mean for Main Street, malls and the competitive retail environment will be rewritten in the coming few years,” Schachter and Dougherty say.
Amazon is the No. 1 e-retailer in North America and Europe, according to Internet Retailer’s Top 500 Guide and Europe 500.