A new L2 report confirms a long-standing theory among analysts: Amazon is using Prime’s free two-day shipping to tie loyalty to everyday items that require frequent replenishment.
Here are some key findings from the report:
- There is a positive correlation between replenishment rate and percentage of Prime-eligible SKUs—reflecting an attempt by Amazon to incentivize customer retention in areas where it matters most.
- The Household category—which includes kitchen and home supplies—accounts for almost half of all Prime-eligible products across CPG verticals. Products that require the most frequent replenishment—such as tissues, laundry detergent, disposable plates, and cleaning tools—have the highest number of Prime-eligible products.
Considering how Prime assortment skews toward common everyday purchases, Amazon’s loyalty program is most likely trying to capture sales from traditional mass merchants such as Walmart and Target. As of February 2017, Amazon had an estimated 65 million Prime members, according to Guggenheim Securities.
Download a copy of L2’s Amazon Prime report.