Removing friction is critical to increasing e-commerce conversion and shipping costs play a big part. That's why Amazon's Prime program generates big results by offering unlimited 2-day shipping for customers.
In 2009, Amazon had 2 million Prime members. In 2011, Prime has 5 million members out of a total 121 million Amazon customers. Although that represents only four percent of all customers...
Amazon Prime members pay a yearly fee (moms & students can receive up to a year for free) to get complimentary two-day shipping on just about anything they buy from Amazon. Amazon doesn't disclose details of the Prime program publicly but according to estimates Amazon Prime members:
- Increase their purchases on Amazon from $400 a year to $900 a year after they join. (source)
- Spend 130% more than regular Amazon customers. (source)
- May be responsible for as much as 20% of Amazon's overall sales in the U.S. (source)
- 82% of Prime members buy on Amazon even if the item is less expensive somewhere else (source)
- 92% of Prime members plan to renew their membership. (source)
But it's not all upside for Amazon.
- The Prime promotion grew Amazon’s shipping costs 55% to $4 billion last year, which is well over the $1.55 billion Amazon gets in shipping fees from customers. (source)
- Amazon spends more than $90 a year for each Prime customer, losing $11 annually for each subscriber. Of the $90, $55 comes from shipping costs and $35 comes from acquiring digital video content. (source)