Amazon Prime A Top Force Driving Retail Disruption

Loop Capital Markets has reiterated its Buy rating and $1,100 price target on Amazon.com, Inc. AMZN following the completion of a Prime user survey the firm conducted.

Research analysts Blake Harper and Anthony Chukumba surveyed over 500 Prime members in order to better understand Amazon's consumer demographics. They believe Amazon’s aggressive growth in the retail industry has been fueled by its successful yearly membership program, and their findings led them to stay bullish on Amazon.

A Few Key Discoveries

Surprisingly, nearly 60 percent of Prime members surveyed are 45 years old or older. Harper and Chukumba believe this indicates older consumers are comfortable shopping online, a plus for the company as this is a huge demographic to target.

The research also found nearly three-quarters of Prime members surveyed have household incomes less than $100,000. Harper and Chukumba said, “We believe this indicates even relatively price conscious consumers think the benefits of Prime outweigh the $99 annual membership fee.”

3. Prime Members are ordering regularly.

Prime members are very frequent shoppers at Amazon. Specifically, 50 percent of individuals surveyed order from Amazon 2–5 times each month, and 10 percent are ordering 6–10 times.

4. Members love free shipping but are now starting to notice media benefits.

Finally, free two-day shipping has been the most used benefit for Prime members, but the additional value of the included media content provided by Prime is increasingly being recognized by most users. Harper and Chukumba believe Amazon still has a lot of potential to increase the usage penetration of these services.

Key Takeaways

Loop Capital Markets expects Amazon to continue to gain market share in North America as consumers continue the transition to online shopping. With this shift, the firm also expects to see higher usage for the Amazon Pantry service and Amazon Dash Buttons. Conversely, Harper and Chukumba are becoming increasingly cautious on specialty hard-line retail sector, but they still think attractive long ideas remain.

Overall, Loop Capital believes Amazon will continue to increase the number of Prime-eligible items on its platform (in retail, apparel, auto parts, grocery, etc.). In addition, Amazon is now focused on providing products that serve as recurring purchases for households. Specifically, it is increasing its stock of grocery and household items. Of note, recent media reports have also indicated that Amazon is looking to enter the pharmacy business.

Amazon shares were trading at $958.49 in Friday's pre-market session.