Amazon.com Inc., No. 1 in the Internet Retailer 2017 Top 500, is offering a discount on its Prime membership to the millions of Medicaid recipients across the U.S. In doing so, the retail giant is continuing its push to woo lower-income shoppers and keep pressure on Walmart Inc., No. 3.
The offer for Medicaid beneficiaries is another effort by Amazon to target consumers with tighter budgets. The Amazon Prime membership gives shoppers perks such as free two-day shipping on millions of products, free photo storage and online streaming of thousands of movies and music.
Amazon doesn’t say how many Prime members it has, however, estimates by securities research firm Consumer Intelligence Research Partners suggest Amazon had 90 million Prime members as of Sept. 30, the end of the retailer’s fiscal third quarter. That means an estimated 63% of all Amazon customers in the U.S. are part of the program, according to CIRP.
However, Prime membership skews toward upper-income consumers. 82% of households with an annual income of at least $112,000 are Prime members compared to 52% of households with an annual income between $21,000 and $41,000, according to 2017 estimates by Piper Jaffray. Similarly, CIRP data suggests only 12% of Prime members earn less than $25,000 a year.
There’s good reason for Amazon to want more Prime customers, even if they are less affluent, as joining Prime appears to spur shopping on Amazon. Each Prime member spends nearly double ($1,300) the amount annually a non-Prime member ($700) spends on Amazon, CIRP says.
Amazon’s expansion of its Prime discount comes shortly after it raised the cost of Amazon Prime memberships bought on a month-to-month basis by $2. The new rate, which took effect on Jan. 19, is $12.99 a month, up from $10.99 a month. That means if a customer maintained a Prime membership for an entire year but paid month to month, he will now pay $155.88 for that membership, up 18.2% from $131.88. The cost of a Prime membership paid for once a year is $99 and remains unchanged.
Amazon also raised the price of Prime Student plans paid month to month by $1, now $6.49 from $5.49. The price paid once a year for an annual student membership remains $49.
In other Amazon news, the retail giant on Tuesday announced plans to open its first Missouri fulfillment center, which it plans to employ roughly 1,500 full-time employees at the facility. Amazon currently operates a sortation center in Hazelwood, Missouri.
Employees at the roughly 800,000-square-foot fulfillment center will pick, pack and ship small items to Amazon customers.
Bloomberg contributed to this story.