Despite making losses, Amazon India continues to invest in Prime, which promises fast and free shipping and allows members free access to movies and TV shows, to acquire a huge customer base and build brand loyalty.
Let’s get one thing clear. Amazon’s membership programme, Prime, is not just a customer acquisition or revenue maximisation tool.
Take a look at the investments Amazon has made into its India entity and the transportation arm in the country in recent months: $1 billion into Amazon India in FY 2017; $30 million in June 2017 and 410 million in September 2016 into Amazon Transportation Services with a further $63 million set to come in soon.
Now look at all the messaging coming out of Amazon – a lot of them are around Prime, its membership programme. Put two and two together, and a lot of the investments Amazon is making in India are around Prime. Why?
Prime’s value proposition for Indian customers is straightforward. Pay Rs 499, under $8, for a year’s membership and get fast and free shipping for millions of products. With next-day shipping charges at Rs 100 a package for non-Prime customers, a member can recoup the annual fee in about five orders. This is an important hook for value-conscious Indian consumers. Also on offer is free access to hundreds of movies in several Indian languages, television shows and Amazon’s original content.
Amazon claims Prime membership in India has doubled since January 2017. Prime members also accounted for every third order between January and March this year and were responsible for over half the orders on Amazon Pantry.
In July, Amazon’s India Head Amit Agarwal claimed that 50 percent of Amazon Prime members were not from the metros.
The value proposition for Amazon also seems straightforward. The membership fee is so low that Prime becomes an easy sell. Once a customer opts for Prime, chances are s/he will keep coming back to Amazon.in, the company’s India platform, for all online purchases. It is clearly a great customer acquisition strategy.
But the focus on Prime makes more sense for reasons beyond these obvious ones. These reasons are extremely strategic for Amazon. To find out what those reasons are read the full article on YourStory’s new editorial product for in-depth and analytical articles, YS Decodes: Amazon India’s real Prime strategy is not the obvious one.