In a heated battle for retail dominance, Amazon (NASDAQ: AMZN) appears to be going after first place. For the first time ever, Amazon is offering low-income shoppers a discounted Prime subscription of $5.99 a month, instead of it's current monthly rate of $10.99 a month, giving its customers a valuable 46% off in savings. For new lower-income Prime members paying yearly, they will save about 29% in savings with $72 per year instead of $99. The recently announced discount program serves as a bold move by Amazon to dominate retail markets that are tailored to consumers receiving government assistance.
Amazon began in 1994 as an online bookstore, allowing customers to reach a plethora of books. Led by CEO and Founder Jeff Bezos, it was apparent that Amazon provided an advantage over physical bookstores, a marketing strategy that later proved an advantage for other markets such as apparel, electronics, and home supplies. In just over 20 years, Amazon has quickly risen to the top of the retail market chain with a large array of products at the click of a button. Along with their newfound success as a commercial source, Amazon entered the online market with the music streaming service Amazon Music, the entertainment streaming service Amazon Studios and a cloud computing service called Amazon Web Services. In addition to their wide network of services, Amazon finds a percentage of its overall revenue by its dedicated consumer membership through the Amazon Prime subscription service. A paid membership service, Amazon Prime offers benefits such as free two-day shipping, discounted one-day shipping pricing and free music and entertainment streaming. The inclusion of Amazon Prime seems to prove as worthwhile, given Amazon's increased share in online shares from 25% in 2012 to 43% in 2016.
The discounted Prime membership is operated on the verification of government assistance, such as the EBT Food Stamp service through the Supplemental Nutrition Assistance Program (SNAP). A program that provides fee waivers for food, the verification as a member of the program can lead to some consumers saving a pretty penny on Prime services. In addition, the recent announcement of a discounted Amazon Prime for lower income consumers proves to be a smart move for the online retail company, given that 74% of low income consumers have access to the internet.
Amazon's marketing move, however, proves to be a competitive push against the strong retail marketing company Wal-Mart (NYSE: WMT). In the last year alone, consumers apart of the SNAP government assistance program spent about $13 billion at Wal-mart. The recent introduction of a discounted Prime, while seeking after Wal-Mart's customers, is also a response to Walmart's recent approaches to maintain consumers. Currently, Walmart is experimenting with free shipping with no added fees, store pickup and its recently acquired e-commerce site Jet.com.
The Amazon Prime discount seems promising, and may be a particularly valuable service for lower income residents, especially those who live in areas with low transportation and a low amount of shopping areas. In fact, Amazon dedicates itself to becoming more accessible for all. Greg Greely, the vice president of Amazon Prime expanded on this fact, stating that Amazon "designed designed this membership option for customers receiving government assistance to make our everyday selection and savings more accessible, including the many conveniences and entertainment benefits of Prime." If it is truly more accessible, other retail markets had better steer clear of Amazon in the coming future.