I got last month a trial to Amazon Prime. For those who do not know: Amazon Prime requires a 79USD membership per year and as a result you get free 2 day shipping on products that qualify for Amazon Prime. And…. there are many many many products that qualify!
So, what has happened in terms of my consumer behavior over the last month… I simply go to Amazon for pretty much everything and bypass any other online retailer. Baby stuff? Should I go to Babies R Us? Probably before Amazon Prime I would have but hey… with “free” shipping at Amazon why would I pay anything to Toys R Us for shipping? Camera stuff? Previously I would go to Adorama or B&H Photo Video, now I go directly to Amazon. Computer stuff? Previously Newegg, now Amazon… and so on.
Amazon plays this smart. On top of me switching from other online retailers to Amazon I also see an uptake in stuff that I order from Amazon… because its so easy, no need to pay for delivery and the package will be at my home in two days… Why bother with anything else?
Lessons: ask consumers to pay a relatively small fee for something that could limit their online purchases (benefit retailer) and take away the biggest frustration for consumers when purchasing online (delivery fee and delivery times). By applying the benefit to as many products in Amazon’s catalogue Amazon virtually has a common differentiator against vertically (focussed) online retailers. On top of Amazon’s sharp pricing it is one way to differentiate competition.