retail news in context, analysis with attitude

• The financial analysis site Guru Focus has a piece about Amazon's decision last week to introduce "another major perk for Prime members by making a collection of books, short stories and magazines free to them in the form of Prime Reading." This is just another example of how Amazon "has been adding more and more layers to the prime membership program, making it clear that it views the membership model as a more sustainable way to stay in the retail business."

The story goes on to point out that while "the new free books service may not be something that is going to drive users in droves into prime membership," there's another question that needs to be asked - "what is the motive behind Amazon adding new services and perks at such a high frequency?"

It is, in fact, a matter of creating an ecosystem. "The retail business is inherently a low margin one, and for an e-commerce company like Amazon the margins can get even tighter due to high shipping costs. One of the best ways to reduce these costs and improve margins is by increasing the amount of merchandise that you sell. To put it simply, the higher the sales, better the odds of you improving your margins."

And so, it makes sense for Amazon to make Prime more attractive to more people, because the numbers indicate that Prime members spend more money on Amazon than non-Prime members - perhaps "about five times as much as non-Prime customers."
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