Amazon CEO Jeff Bezos once said the company’s goal is to make it “irresponsible” for someone to choose not to join its Prime membership program, and it looks like it’s working.
The tech giant has surpassed 150 million paid Prime subscribers globally after the biggest quarter in Prime history, Bezos announced in the company’s quarterly earnings release Thursday afternoon.
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The milestone comes less than two years after the company disclosed the number of Prime members for the first time, saying in April 2018 that it had reached 100 million Prime members globally. It comes less than a year after Amazon started making one-day delivery the standard for free Prime delivery, shifting from two-day delivery previously.
On a conference call with reporters, Amazon chief financial officer Brian Olsavsky said the shift to one-day shipping accelerated the increase in memberships “a bit,” but he said the growth is primarily the result of the company’s longstanding efforts to add benefits beyond free shipping.
“That is what we’re seeing — it’s not anything sudden, but the progress on a long-term strategy of ours,” Olsavsky said.
The latest example of the company adding benefits to Prime was making Amazon Fresh and Whole Foods Market two-hour grocery delivery a Prime benefit at no additional cost. Previously the service cost $14.99 a month. Amazon said grocery delivery orders more than doubled in the fourth quarter, compared to the prior year. It did not provide specific numbers.
In the earnings release, Bezos said the number of items delivered via free one-day and same-day delivery more than quadrupled in the holiday quarter, without providing specific numbers.
Amazon’s standard Prime subscription rate is $119/year, which would translate into revenue of more than $17.8 billion, although the company offers discounted memberships for students and others. Amazon incurred $12.9 billion in shipping costs in the fourth quarter alone. The company doesn’t disclose the total amount it collects in Prime membership fees or separate shipping fees from customers, but historically its total costs have significantly exceeded what it collects.
For the December quarter, Amazon posted $87.4 billion in revenue, up 21% from the year-ago quarter, with earnings per share of $6.47, well ahead of analyst expectations of $4.03 per share. The company’s market value surged past $1 trillion again as its stock climbed in after-hours trading.
Amazon says it expects net sales between $69 billion and $73 billion in the first quarter of 2020, ending in March, representing growth of 16% to 22%, with operating income between $3 billion and $4.2 billion, down from $4.4 billion in the first quarter of 2019.
Amazon has boosted spending on transportation in each quarter since rolling out the one-day shipping benefit in the second quarter of last year. Olsavsky told reporters that the guidance takes into account an increase of $1 billion in transportation costs compared to the year-ago quarter.